Interim REPORt 2014 · 2019. 8. 29. · Interim Report 2014 3 FINANCIAL HIGHLIGHTS (in HK$’ million, unless otherwise specified) 6 Months Ended 30 June 2014 6 Months Ended 30 June

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3008 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong香港灣仔港灣道23號鷹君中心3008室

Tel 電話 (852) 2879 1288 Fax 傳真 (852) 2827 1338 www.ChampionReit.com

Interim REPORt 2014 中期報告

Champion Real Estate Investment Trust (stock code: 2778) is a Hong Kong collective investment scheme authorised

under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

冠君產業信託（股份代號：2778）為根據香港法例第 571 章證券及期貨條例第 104 條獲認可的香港集體投資計劃

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01

4

PROFILE

OBJECTIVES

TRUST

TRUST

Champion Real Estate Investment Trust is a trust formed to own and invest in income-producing office and retail properties and is one of the 10 largest REITs by market capitalization in the Asia excluding Japan region. The Trust’s focus is on Grade-A commercial properties in prime locations. It currently offers investors direct exposure to 2.93 million sq. ft. of prime office and retail floor area by way of two landmark properties in Hong Kong, Citibank Plaza and Langham Place, one on each side of the Victoria Harbour.

Champion REIT’s key objectives are to provide investors with stable and sustainable distributions and to achieve long-term capital growth. This aim of providing attractive total returns will be achieved by, among other things, proactive management of the properties in the Trust’s portfolio and the selective acquisition of properties that will enhance distributions.

2 Corporate Information

3 Financial Highlights

MANAGEMENT DISCUSSION AND ANALYSIS4 Overview

5 Operational Review

7 Outlook

8 Valuation of Properties

9 Financial Review

CORPORATE GOVERNANCE AND COMPLIANCE11 Corporate Governance

15 Connected Party Transactions Report

21 Disclosure of Interests

24 Other Information

FINANCIALS26 Report on Review of Condensed

Consolidated Financial Statements

27 Condensed Consolidated

Financial Statements

53 Investment Properties Portfolio

54 Performance Table

CONTENTS

2 Champion Real Estate Investment Trust

CORPORATE INFORMATIONCHAMPION REIT

Champion Real Estate Investment Trust(a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong))

REIT MANAGER

Eagle Asset Management (CP) LimitedSuite 3008, 30th FloorGreat Eagle Centre23 Harbour RoadWanchaiHong KongTel: (852) 2879 1288Fax: (852) 2827 1338Email: [email protected]

BOARD OF DIRECTORS OF THE REIT MANAGER

NON-EXECUTIVE DIRECTORSLO Ka Shui (Chairman)HO Shut KanIP Yuk Keung, AlbertLO Kai Shui

EXECUTIVE DIRECTORLEE Ching Ming, Adrian (Chief Executive Officer)

INDEPENDENT NON-EXECUTIVE DIRECTORSCHA Mou Sing, PaysonCHENG Wai Chee, ChristopherSHEK Lai Him, Abraham

AUDIT COMMITTEE OF THE REIT MANAGER

SHEK Lai Him, Abraham (Chairman)CHENG Wai Chee, ChristopherLO Ka Shui

DISCLOSURES COMMITTEE OF THE REIT MANAGER

LEE Ching Ming, Adrian (Chairman)LO Ka ShuiSHEK Lai Him, Abraham

RESPONSIBLE OFFICERS OF THE REIT MANAGER

LEE Ching Ming, AdrianCHOO Chong Yao, PatrickKWONG Chi Kwong

COMPANY SECRETARY OF THE REIT MANAGER

G. E. Secretaries Limited

PROPERTY MANAGER

Eagle Property Management (CP) Limited

TRUSTEE

HSBC Institutional Trust Services (Asia) Limited

PRINCIPAL BANKERS

Bank of China (Hong Kong) LimitedCitibank, N.A.Hang Seng Bank LimitedThe Hongkong and Shanghai Banking Corporation Limited

LEGAL ADVISOR

Baker & McKenzie

AUDITOR

Deloitte Touche Tohmatsu

PRINCIPAL VALUER

Savills Valuation and Professional Services Limited

UNIT REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services LimitedShops 1712-171617th Floor, Hopewell Centre183 Queen’s Road EastWanchaiHong KongEmail: [email protected]

WEBSITE

www.ChampionReit.com

STOCK CODE

2778

3Interim Report 2014

FINANCIAL HIGHLIGHTS(in HK$’ million, unless otherwise specified)

6 Months Ended30 June 2014

6 Months Ended 30 June 2013 % Change

Total Revenue 1,155 1,059 + 9.1%

Property Operating Expenses 234 200 + 17.0%

Net Property Income 921 858 + 7.2%

Profit After Tax1 148 1,570 - 90.6%

Distributable Income 663 634 + 4.7%

Distribution Amount 597 570 + 4.7%

Distribution per Unit (HK$) 0.1042 0.0998 + 4.4%

Expense Ratio (%) 20.3 18.9 + 1.4%2

As of30 Jun 2014

As of31 Dec 2013 % Change

Gross Value of Portfolio 61,150 61,509 - 0.6%

Net Asset Value per Unit (HK$) 7.85 7.94 - 1.1%

Gearing Ratio (%) 23.5 23.4 + 0.1%2

Notes:

1. Includes gains or losses upon revaluation.

2. Absolute change is used for figures stated in percentages.


MANAGEMENT DISCUSSION AND ANALYSIS

OverviewGross Revenue for the six months ended 30 June 2014 was HK$1,155 million, an increase of 9.1% compared to the same period a year ago. Revenue improved mainly on the back of rental growth at Langham Place. Operating Expenses increased 17% to HK$234 million as building management expenses were pushed up by general inflation while leasing commissions paid increased due to the larger floor area subject to lease rollovers at Citibank Plaza. Net Property Income for the Period amounted to HK$921 million, a 7.2% improvement over the first six months of last year.

The appraised value of the Trust’s properties as of 30 June 2014 was HK$61,150 million, a 0.6% decrease from 31 December 2013. Net Asset Value per Unit was HK$7.85, compared to HK$7.94 at the end of 2013. The Gearing Ratio increased marginally to 23.5%.

Profit After Tax for the Period was HK$148 million, as compared to HK$1,570 million for the same period in 2013. This reduction in accounting profit was primarily due to the HK$390 million downward revaluation of our property portfolio in 2014 against an increase in valuation of HK$698 million in the first half of 2013. Excluding the revaluation loss and other items that are non-cash in nature, Distributable Income for the Period increased 4.7% to HK$663 million. This is a smaller increase compared to the rise in Net Property Income as cash finance costs also increased by HK$21 million to HK$139 million.

Incremental debt was incurred from the acquisition of additional floors at Citibank Plaza in the second half of 2013. The Distribution Amount, set at 90% of Distributable Income, will be HK$597 million. The Distribution per Unit (“DPU”) for the Period is HK$0.1042, up 4.4% from a year ago.

In May 2014, Champion REIT successfully refinanced HK$7.5 billion in bank loans. The average maturity of our debt portfolio has been extended to 4.62 years as a result.



Operational Review6 Months Ended

30 June 2014HK$’000

6 Months Ended 30 June 2013

HK$’000 % Change

Citibank Plaza

Revenue 614,208 600,412 + 2.3%

Operating Expenses 122,947 102,448 + 20.0%

Net Property Income 491,261 497,964 - 1.3%

Langham Place Office Tower

Revenue 159,344 138,408 + 15.1%


Net Property Income 126,051 110,284 + 14.3%

Langham Place Mall

Revenue 381,450 319,843 + 19.3%


Net Property Income 303,403 250,250 + 21.2%

CITIBANK PLAZA

While business sentiment was generally positive, multinational banks remained cautious in business expansion and focused on cost control. As a result, the demand for offices from banks was weak. However with the lack of new supply of space within Central, occupancy and rent rates in Central on balance remained relatively steady in the first half of the year. Incremental demand for new office space in Central for the first half was dominated by Chinese financial firms seeking to capitalize on new financial liberalization and cross registration measures between Hong Kong and China.

Rents at Citibank Plaza have been further reduced to attract new tenants. Asking rents (the rental rate based on lettable floor area quoted

for new tenancies) are currently at HK$75-80 per sq. ft. There was a 3.3% net gain in occupancy to 88.6% in the first half of the year even as tenancies involving 21% of the property’s floor area expired. The net increase comprised mainly smaller new China-based office users. The lower effective rents for new leases commencing during the Period have resulted in some negative rental reversion. Passing rents at Citibank Plaza, which are the average rental rate of existing tenancies weighted by floor area, have come down by over HK$2.50 per sq. ft. to HK$82.07 per sq. ft. as of 30 June 2014.

In spite of the lower passing rent, revenue at Citibank Plaza improved 2.3% to HK$614 million due to income from the newly acquired floors and improved carpark income. On the other hand, as

the floor area renewed and newly let in the first half of this year was more than double that of the corresponding period last year, rental commission increased by HK$8.5 million. At the same time net building management expenses (being building management expenses less amounts recovered from tenants) increased HK$1.3 million following an increase in the building management charges. As a result, net property income was 1.3% lower, at HK$491 million.

LANGHAM PLACE OFFICE TOWER

Outside of Central, the resilience of the non-financial sectors has sustained demand for office space in the other key office districts of Hong Kong, where vacancy levels have remained in the low single digits.


Operational ReviewMANAGEMENT DISCUSSION AND ANALYSIS

The occupancy rate at the Langham Place Office Tower was maintained at a high level of 98.8% as of 30 June 2014. Within that, however, a tenancy involving 10% of floor area with an expiry date immediately after mid-year 2014 has not been renewed. Though a good portion of the floor area has since been re-let, the downtime in between leases will bring down the average occupancy rate at the building during the second half of the year. Asking rents (based on gross floor area) at the Langham Place Office Tower remained unchanged at HK$38-45 per sq. ft. The passing rent increased from HK$32.86 at the end of last year to HK$34.78 as of 30 June 2014. This was a result of higher rent rates achieved on 23% of the floor area subject to new leases during the first half.

Net property income at the Office Tower grew 14.3% to HK$126 million. Revenue increased 15.1% to HK$159 million, compared to HK$138 million for the corresponding period in 2013. Operating expenses however increased 18.4% to HK$33 million, again driven by increases in rental commission and building management expenses.

Langham Place Office

15%Professional &Sales Services

10%Insurance

3%Others

1%Vacant

38%Merchandizing

& Trading

33%Lifestyle

Tenant Profile(Jun 2014)

Langham Place Mall

10%Others

0%Vacant

10%Health & Beauty

16%Entertainment

20%Food &

Beverages

44%Fashion &

Accessories


11% Vacant

7% Corporate

2% Consultancy

18%Fund Management

2% Securities

5% Legal

4% Others3% Retail

47%Banking

Citibank Plaza


LANGHAM PLACE MALL

While overall Hong Kong retail sales growth in the first half of 2014 slowed down significantly due to reduced tourist spending on luxury goods, the mid-priced segment of the retail market targeted by Langham Place Mall has been relatively resilient. Tenant sales have also been boosted by the increase in floor area allocated to beauty and skincare products. In the first half of 2014, there was a 15% increase in the average sales per sq. ft. of its tenants.

During this period, tenancies representing only 4% of the Mall’s floor area were rolled over, resulting in a small increase in the passing rent rate from HK$144.26 at the end of 2013 to HK$146.01 per sq. ft. presently. The Mall however enjoyed the follow-on effect of rent rate increases in the second half of 2013. Passing rents at mid-year 2014 were HK$27 per sq. ft. higher than a year ago, resulting in a significant increase in base-rent income. At the same time, the excellent performance of some cosmetics and accessories retailers contributed to HK$46.7 million in turnover rent income in the first

half of 2014 as compared with HK$43.4 million for the same period last year, notwithstanding the higher threshold for turnover rent assessment brought about by the much higher base-rents. In all, revenue increased 19.3% from HK$320 million to HK$381 million. Operating expenses were up 12.1% to HK$78 million for the Period, mainly due to increases in building management expenses. Overall, net property income increased by 21.2% from HK$250 million to HK$303 million.



OutlookFrom the macroeconomic perspective the outlook is not as bad as previously feared. The winding down of liquidity boosting measures in the United States has not created a significant drag on the global economy. U.S. economic indicators in fact point to stronger growth for the rest of this year. The Chinese economy also appeared to have stabilized after the implementation of targeted stimulus actions. A potential bright spot for the Hong Kong financial markets is the new financial liberalization measures between Hong Kong and China, including the launch of Shanghai-Hong Kong Stock Connect in October and the impending implementation of cross-registration for Hong Kong and China investment funds.

At this juncture, challenges loom ahead for Citibank Plaza. Leases on 20.6% of the floor area are due to expire in the second half of 2014, including that of a major investment bank which will vacate 14.3% of the building floor area at the end of the third quarter. Combined with the preexisting vacancy rate, over a quarter of the building could well be vacant at the end of the year. Binding commitments have been secured from new tenants for 3.5% of floor area, though their leases will commence in early 2015. However, rebuilding occupancy at Citibank Plaza will not be an easy task as the increase in fitting-out costs over the past few years has become a deterrent to relocation for larger tenants. It would be necessary for us to further increase our flexibility in pricing and lease features to garner more tenants. The weighted average rental rate

of tenancies expiring in 2014 is HK$96.37 per sq. ft., considerably higher than the achievable market rents. Thus leasing activity will continue to generate negative rental reversion, though its major impact on our income will be seen in 2015 onwards.

In 2015 the supply of office space in the Hong Kong SAR will be above its long term average for the first time in five years. Although the bulk of this new supply is concentrated in the Kowloon East district, the rest of the Kowloon Peninsula should begin to feel its effects and rent rates may be plateauing after a multi-year rally. Nevertheless, positive rental reversions on lease rollovers at Langham Place Office Tower will continue to lead to higher income for 2014. The weighted average rental rate of expiring tenancies in 2014 is HK$28.63 per sq. ft., which is considerably lower than the achievable market rents. We therefore expect to see further growth in office rental income in the second half.

While the change in spending patterns of mainland visitors has significantly affected the luxury retail segment in Hong Kong, the Langham Place Mall has so far been largely shielded due to its focus on cosmetics, as well as mid-priced fashion and accessories. Nonetheless, the apparent slowdown in Mainland tourist arrivals towards mid-year 2014 may have some impact on Langham Place’s tenants down the road. Fortunately, our strategic reallocation of more floor area to cosmetics and fashion accessories should be able to support overall

sales growth. The leases expiring in 2014 are skewed towards the second half of the year. All of these leases have been either renewed or re-let, including a new lease on the cinema space which has taken effect in July, mostly with a material rise in their base rents. Therefore there should continue to be excellent income growth from Langham Place Mall for the remainder of 2014.

While there should continue to be strong rental growth at Langham Place, we expect the rental income at Citibank Plaza to weaken in the fourth quarter. In addition, higher interest costs from the new bank loans arranged in May and a higher effective tax rate in the second half of 2014 will also act to reduce our Distributable Income in the second half. Notwithstanding our positive interim results, investors should be aware that DPU for the second half of 2014 may be lower than that for the same period in 2013.

By Order of the Board

Eagle Asset Management (CP) Limited(as manager of Champion Real Estate Investment Trust)

Lo Ka ShuiChairman

Hong Kong, 12 August 2014



Valuation of PropertiesAccording to the Property Valuation Reports issued by Savills Valuation and Professional Services Limited on 30 July 2014, the valuation of the properties of Champion REIT broken down by usage as of 30 June 2014 is:

Jun 2014 ValuationCitibank Plaza

HK$ milLangham Place

HK$ milSub-total

HK$ mil

Office 35,059 7,573 42,632

Retail 441 16,752 17,193

Car Park 395 300 695

Miscellaneous 410 220 630

Total 36,305 24,845 61,150

Champion REIT’s property portfolio is now valued at HK$61.15 billion, a decrease of HK$359 million from the December 2013 valuation of HK$61.51 billion. The capitalization rate used to value Citibank Plaza has remained the same at 3.3% and its reduction in value of HK$1.60 billion was based on lower rental assumptions. The capitalization rate used to value Langham Place was also unchanged, at 4.0%, and its HK$1.24 billion increase in value was due to higher rental assumptions.



Financial ReviewDISTRIBUTIONS

The Distribution Amount of Champion REIT for the Period was HK$597,054,000 (six months ended 30 June 2013: HK$570,200,000), calculated as 90% of Champion REIT’s total available distributable income of HK$663,394,000 (six months ended 30 June 2013: HK$633,555,000).

The distribution per unit for the Period was HK$0.1042. This represents an annualized distribution yield of 6.1% based on the closing price of HK$3.60 as at 30 June 2014. The distribution per unit, however, is subject to adjustment upon the issuance of new units between 1 July 2014 and the record date. Further announcement will be made to inform Unitholders of the actual interim distribution per unit for the Period.

CLOSURE OF REGISTER OF UNITHOLDERS

The Register of Unitholders will be closed from Wednesday, 17 September 2014 to Monday, 22 September 2014 (“Record Date”),

both days inclusive, during which period no transfer of Units will be effected. The payment of the distribution for the six months ended 30 June 2014 (“2014 Interim Distribution”) will be made on 9 October 2014 to Unitholders whose names appear on the Register of Unitholders on the Record Date.

In order to qualify for the 2014 Interim Distribution, all properly completed transfer forms (accompanied by the relevant Unit certificates) must be lodged with Champion REIT’s Unit Registrar, Computershare Hong Kong Investor Services Limited of Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Tuesday, 16 September 2014.

DEBT PROFILE

In May 2014, the Trust arranged a 3-year HK$3,700 million term loan and a 5-year HK$3,800 million term loan for the purpose of refinancing loans of HK$7,000 million and HK$500 million which were due in May 2014 and September 2015 respectively. The 3-year HK$3,700

million term loan bears an interest of HIBOR plus 1.20% per annum and is repayable in May 2017. The 5-year HK$3,800 million term loan bears an interest of HIBOR plus 1.36% per annum and is repayable in May 2019.

As at 30 June 2014, total outstanding borrowings of the Trust was HK$14,703.7 million with total fixed rate debt amounting to HK$3,103.7 million, the same when compared to six months ago. The REIT Manager will monitor interest rate movements and may, depending on market conditions, consider putting in place interest rate swaps in respect of the loan facilities.

In order to fully hedge the currency exposure with respect to the principal as well as the interest of the Medium Term Note (“MTN”), the Trust entered into cross currency swaps (the “CCSs”) in an aggregate amount of US$400 million. With these CCSs, the Trust has locked in the exchange rates of both the final principal and interest payments at an average rate of HK$7.7593 to US$1.00.

Committed Debt Facilities (1)

As at 30 June 2014

HK$ millionFixed rate

debtFloating

rate debtUtilised

facilitiesUndrawnfacilities

Total committed

facilities

Bank Loans – 11,600.0 11,600.0 300.0 11,900.0

MTN (2) 3,103.7 – 3,103.7 – 3,103.7

Total 3,103.7 11,600.0 14,703.7 300.0 15,003.7

Percentage 21.1% 78.9% 98.0% 2.0% 100.0%

(1) All amounts are stated at face value

(2) After accounting for cross currency swaps


Financial ReviewMANAGEMENT DISCUSSION AND ANALYSIS

Facility Maturity Profile

As at 30 June 2014

HK$ million % of total

Due in year 2016 2,200.0 15.0

Due in year 2017 3,700.0 25.2

Due in year 2018 1,900.0 12.9

Due in year 2019 3,800.0 25.8

Due in year 2023 3,103.7 21.1

Total 14,703.7 100.0

With the loan refinancing in May 2014, the average outstanding life of the Trust’s committed debt facilities has now been extended to 4.62 years (31 December 2013: 3.11 years).

The value of the Trust’s investment properties at 30 June 2014 was appraised at HK$61,150 million, representing a 0.6% decrease from HK$61,509 million as at 31 December 2013. Taking into account the fall in value of the property portfolio, the Gearing Ratio (or total borrowings as a percentage of gross assets) increased slightly from 23.4% as at 31 December 2013 to 23.5% as at 30 June 2014. The gross liabilities (excluding net assets attributable to unitholders) as a percentage of gross assets were 28.0% (31 December 2013: 27.8%).

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS

Net assets attributable to Unitholders was HK$44,987.3 million as at 30 June 2014, a decrease of 0.8% compared to

HK$45,364.0 million as at 31 December 2013.

The Net Asset Value per Unit as at 30 June 2014 was HK$7.85 (31 December 2013: HK$7.94). This is equivalent to a 118.1% premium to the closing unit price of HK$3.60 as at 30 June 2014.

CASH POSITION

As at 30 June 2014, the Trust had total undrawn bank loan facilities of HK$300 million (31 December 2013: HK$300 million) and a cash balance of HK$1,138.9 million (31 December 2013: HK$1,066.4 million). Taking into consideration the financial resources available to the Trust, the Trust has sufficient liquid assets to satisfy its working capital and operating requirements.

PLEDGED ASSETS

As at 30 June 2014, properties of Champion REIT with a fair value of HK$42,442 million (31 December 2013: HK$43,778 million) were pledged to secure the debt facilities granted to the Trust. No property is pledged to secure the MTN.

COMMITMENTS

Except for the capital commitment of approximately HK$9.2 million (31 December 2013: HK$26.6 million) in respect of improvement works for investment properties contracted for but not provided in the condensed consolidated financial statements, the Trust did not have any other significant commitments as at 30 June 2014.


CORPORATE GOVERNANCE AND COMPLIANCE

Corporate GovernancePRINCIPLES OF CORPORATE GOVERNANCE

Champion REIT is committed to attaining global best practices and standards for all activities and transactions conducted in relation to the Trust and any matters arising out of its listing or trading on The Stock Exchange of Hong Kong Limited (“Stock Exchange”). The current corporate governance framework adopted by the REIT Manager emphasizes accountability to all Unitholders, resolution of conflict of interest issues, transparency in reporting, compliance with relevant regulations and sound operating and investing procedures.

The REIT Manager has in place a comprehensive set of compliance procedures and guidelines which set out the key processes, systems and measures used to implement this corporate governance framework.

AUTHORISATION STRUCTURE AND GOVERNANCE STRUCTURE

Champion REIT is a collective investment scheme constituted as a unit trust and authorised by the Securities and Futures Commission (“SFC”) under section 104 of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) (“SFO”) and regulated by the SFC pursuant to the provisions of the SFO and the Code on Real Estate Investment Trusts (“REIT Code”) and the Rules Governing the Listing of Securities on the Stock Exchange (“Listing Rules”).

The REIT Manager has been authorised by the SFC under section 116 of the SFO to conduct the regulated activity of asset management. Mr. Lee Ching Ming, Adrian, the Executive Director and Chief Executive Officer, Mr. Choo Chong Yao, Patrick, the Chief Investment Officer and Mr. Kwong Chi Kwong, the Chief Operating Officer are the responsible officers of the REIT Manager pursuant to the requirements of section 125 of the SFO and paragraph 5.4 of the REIT Code. The Responsible Officers have completed the Continuous Professional Training as required by the SFO for each calendar year.

HSBC Institutional Trust Services (Asia) Limited (the “Trustee”) is registered as a trust company under section 77 of the Trustee Ordinance (Chapter 29 of the laws of Hong Kong) and is qualified to act as a trustee for collective investment schemes authorised under the SFO pursuant to the REIT Code.

The Trustee and the REIT Manager are independent of each other. The Trustee is responsible for the safe custody of the assets of Champion REIT on behalf of Unitholders, whereas the REIT Manager is responsible for managing Champion REIT in accordance with the Trust Deed (as defined below) and ensuring that the financial and economic aspects of Champion REIT’s assets are professionally managed in the sole interest of Unitholders. The relationship between the Trustee, the REIT Manager and the Unitholders is set out in the Deed of Trust constituting Champion REIT (“Trust Deed”) entered into between the REIT Manager and the Trustee on 26 April 2006 as amended by a First Supplemental Deed dated 5 December 2006, a Second Supplemental Deed dated 4 February 2008, a Third Supplemental Deed dated 9 March 2009, a Fourth Supplemental Deed dated 23 July 2010 and a Fifth Supplemental Deed dated 13 March 2012.

The properties of the Trust are managed by various operating entities, including the REIT Manager, the Property Manager, and the DMC/Estate Managers etc. Pursuant to the Property Management Agreement, Eagle Property Management (CP) Limited (the “Property Manager”) will provide property management services, lease management services and marketing services for the properties of Champion REIT located in Hong Kong on an exclusive basis subject to the overall management and supervision of the REIT Manager. The Property Manager has a team of well-experienced operational staff exclusively dedicated to providing property management services to Champion REIT.

FUNCTIONS OF THE BOARD OF DIRECTORS OF THE REIT MANAGER AND DELEGATION

The Board of the REIT Manager is responsible for ensuring that the REIT Manager discharges its duties under the Trust Deed, which include but not limited to managing the Trust in accordance with the Trust Deed in the sole interest of the Unitholders, ensuring sufficient oversight of the daily operations and financial conditions of the Trust when managing the Trust, and ensuring compliance with the licensing and authorisation conditions of the REIT Manager and the


Corporate GovernanceCORPORATE GOVERNANCE AND COMPLIANCE

Trust and with any applicable laws, rules, codes or guidelines issued by government departments, regulatory bodies, exchanges or any other organisations regarding the activities of the Trust or its administration. The Board also plays a central support and supervisory role in the corporate governance duties by regularly reviewing the Compliance Manual and other policies and procedures on corporate governance and on legal and regulatory compliance, approving changes to governance policies in light of the latest statutory regime and international best practices, and reviewing corporate governance disclosures. Subject to the matters specifically reserved to the Board as set out in the Compliance Manual, the Board delegates certain management and supervisory functions to the Board committees and the management team.

The Board currently comprises 8 members, with 1 Executive Director and 7 Non-executive Directors (including 3 Independent Non-executive Directors).

On 16 May 2014, Mr. Cheng Wai Chee, Christopher was re-designated as an Independent Non-executive Director of the REIT Manager. During Mr. Cheng’s tenure as a Non-executive Director of the REIT Manager, he did not have any executive or management role or functions in the REIT Manager, Champion REIT and its special purpose vehicles, nor had he throughout such period been under the employment of any operating entities (including the REIT Manager) that managed the properties of Champion REIT, and he had only attended meetings of the Board in his capacity as a Non-executive Director. The Board and the Audit Committee are of the opinion that Mr. Cheng possesses all the characteristics to act as an Independent Non-executive Director of the REIT Manager and will be able to carry out his duties impartially and independently.

On 9 June 2014, Mr. Ip Yuk Keung, Albert was re-designated as a Non-executive Director of the REIT Manager as he was appointed as Executive Director and Chief Executive Officer of LHIL Manager Limited (as trustee-manager of Langham Hospitality Investments (“LHI”)) and Langham Hospitality Investments Limited (together with LHI, “Langham”) on the same day. Langham is controlled by Great Eagle Holdings Limited (“Great Eagle”), the controlling Unitholder of Champion REIT, and is listed on the Main Board of the Stock Exchange. The re-designation is in compliance with the REIT Manager’s corporate governance policy as contained in the Compliance Manual of Champion REIT.

The Board of the REIT Manager may establish Board committees with clear terms of reference to review specific issues or items. The two standing Board committees established are the Audit Committee and the Disclosures Committee.

The role of the Audit Committee is to monitor and evaluate the effectiveness of the REIT Manager’s internal controls. The Audit Committee also reviews the quality and reliability of information prepared for inclusion in financial reports issued by the REIT Manager. The Audit Committee is responsible for the nomination of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance. Following the aforesaid re-designation of Mr. Ip Yuk Keung, Albert, Mr. Ip resigned as the Chairman and a member of the Audit Committee with effect from 9 June 2014. Mr. Shek Lai Him, Abraham, an existing member of the Audit Committee, was appointed as the Chairman of the Audit Committee, and Mr. Cheng Wai Chee, Christopher was appointed as a member of the Audit Committee, both with effect from 9 June 2014. Accordingly, the Audit Committee currently comprises 2 Independent Non-executive Directors (namely, Mr. Shek and Mr. Cheng) and a Non-executive Director (namely, Dr. Lo Ka Shui). Mr. Shek is the Chairman of the Audit Committee.

The role of the Disclosures Committee is to review matters relating to the disclosure of information to Unitholders and public announcements. The Disclosures Committee works with the management of the REIT Manager to ensure the disclosure of information is accurate and complete. The Disclosures Committee currently comprises a Non-executive Director (namely, Dr. Lo Ka Shui), an Independent Non-executive Director (namely, Mr. Shek Lai Him, Abraham) and an Executive Director (namely, Mr. Lee Ching Ming, Adrian). Mr. Lee is the Chairman of the Disclosures Committee.



CHANGES IN INFORMATION OF DIRECTORS OF THE REIT MANAGER

Subsequent to publication of the 2013 Annual Report of Champion REIT, the REIT Manager received notifications regarding the following changes of Directors’ information:

Directors Changes of Information

Mr. Ip Yuk Keung, AlbertNon-executive Director of the REIT Manager (re-designated on 9 June 2014)

– Appointed as the Independent Non-executive Director of Lifestyle International Holdings Limited with effect from 22 April 2014

– Appointed as the Executive Director and Chief Executive Officer of LHIL Manager Limited (as trustee-manager of LHI) and Langham Hospitality Investments Limited with effect from 9 June 2014

Mr. Cha Mou Sing, PaysonIndependent Non-executive Director of the REIT Manager

– Resigned as a Director of Asia Television Limited in March 2014

Mr. Shek Lai Him, AbrahamIndependent Non-executive Director of the REIT Manager

– Appointed as a Director of The Absolutely Fabulous Theatre Connection Company Limited with effect from 7 April 2014

– Retired by rotation as the Independent Non-executive Director of Hsin Chong Construction Group Limited (“Hsin Chong”) at the annual general meeting of Hsin Chong held on 12 May 2014

CONFLICTS OF INTERESTS AND BUSINESS COMPETITION WITH GREAT EAGLE HOLDINGS LIMITED

The REIT Manager, the Property Manager, Longworth Management Limited (“Longworth”) and The Great Eagle Properties Management Company, Limited (“GEPM”) take up the role of Manager and Property Manager of Champion REIT, DMC Manager and DMC Sub-manager of Citibank Plaza, DMC Manager and CAF Manager of Langham Place, Sub-DMC Manager of Langham Place Office Tower and Estate Manager of the Langham Place Mall (as the case may be). Each of the above companies is a wholly-owned subsidiary of Great Eagle. Moreover, Dr. Lo Ka Shui, Mr. Lo Kai Shui and Mr. Ip Yuk Keung, Albert are directors of Great Eagle and/or its affiliated companies. There may be potential conflicts of interests between Great Eagle and Champion REIT in respect of the performance of estate management services in relation to Citibank Plaza and Langham Place or other properties.

Great Eagle, headquartered in Hong Kong, is engaged principally in the development, management and investment in the high quality office, retail, residential and hotel properties in Asia, Australia, North America and Europe. There may be circumstances where Champion REIT competes directly with Great Eagle and/or its subsidiaries or associates for acquisitions or disposals of properties as well as for tenants within the Hong Kong market as Great Eagle, its subsidiaries and associates are engaged in and/or may engage in, amongst other things, investment in, and the development and management of, properties in the office, retail, residential and hotel sectors in Hong Kong and overseas.

With respect to estate management services, the REIT Manager does not anticipate any significant likelihood of conflicts of interests arising between Great Eagle and Champion REIT. Further, given the extensive experience of Longworth and GEPM in the estate management of Citibank Plaza and Langham Place, the REIT Manager considers that it is in the interest of Champion REIT for the existing estate management arrangements to continue. Currently, Longworth and GEPM together have employed more than 200 full-time staff exclusively dedicated to carrying out property management services in respect of Citibank Plaza and Langham Place with a separate office location and IT system.



With respect to leasing and marketing functions, the REIT Manager does not anticipate any significant likelihood of conflicts of interests arising between Great Eagle and Champion REIT because the Property Manager provides property management services (including leasing and marketing functions) in respect of Citibank Plaza and Langham Place exclusively and will not perform any property management functions in respect of Great Eagle’s properties. The Property Manager has an office location that is separate from the other Great Eagle entities that perform leasing and marketing functions in respect of other properties held by Great Eagle. To ensure that there is segregation of information between the Property Manager and other Great Eagle entities, the Property Manager has its own database with access and security codes different from those of Great Eagle.

The REIT Manager has instituted various procedures to deal with potential conflicts of interests issues, including but not limited to: (i) in respect of matters in which a Director has an interest, direct or indirect, in any contract or arrangement to which Champion REIT (whether through the REIT Manager or the Trustee) is a party, such interested Director shall disclose his interest to the Board and abstain from voting at a meeting of the Directors at which the relevant matters are to be decided; (ii) the REIT Manager is a dedicated manager to Champion REIT and will not manage any other real estate investment trust or be involved in any other real property business; (iii) the REIT Manager has a team of full-time senior management and employees that operates independently of Great Eagle; and (iv) all connected party transactions are managed in accordance with the requirements set out in the REIT Code, the Compliance Manual and other relevant policies and guidelines issued for and adopted by Champion REIT.

COMPLIANCE

During the six months ended 30 June 2014, the REIT Manager and Champion REIT have complied with the provisions of the REIT Code, the Trust Deed, the relevant provisions and requirements of the SFO and the Listing Rules applicable to Champion REIT.

The REIT Manager and Champion REIT have also complied with the provisions of the Compliance Manual and all code provisions, where applicable, as set out in the Corporate Governance Code and Corporate Governance Report contained in Appendix 14 to the Listing Rules throughout the six months ended 30 June 2014.

The REIT Manager has adopted the Code Governing Dealings in Securities by the Management Persons (“Securities Dealings Code”) on terms no less exacting than the required standard as set out in the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules. The Management Persons include directors, executive officers and the company secretary of the REIT Manager. The REIT Manager has made specific enquiry of the Management Persons who have confirmed that they have complied with the required standard set out in the Securities Dealings Code during the six months ended 30 June 2014.

REVIEW OF INTERIM RESULTS

The unaudited interim results of Champion REIT for the six months ended 30 June 2014 have been reviewed by the Audit Committee and the Disclosures Committee of the REIT Manager, and by the Trust’s external auditor, Deloitte Touche Tohmatsu, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.



CONNECTED PARTY TRANSACTIONS REPORTSet out below is the information in respect of the connected party transactions involving Champion REIT and its connected persons as defined in paragraph 8.1 of the Code on Real Estate Investment Trusts (“REIT Code”):–

CONNECTED PARTY TRANSACTIONS WITH THE GREAT EAGLE CONNECTED PERSONS GROUP AND/OR THE SFK CONNECTED PERSONS GROUP

The following tables set forth information on the connected party transactions between Champion REIT and the Great Eagle Connected Persons Group and/or the SFK Connected Persons Group for the 6 months ended 30 June 2014 (“Period”).

Great Eagle Holdings Limited (“Great Eagle”) is a connected person of Champion REIT by virtue of being the holding company of the REIT Manager and also being a significant holder (as defined under the REIT Code) of Champion REIT through the direct unitholdings of its controlled corporations (including Top Domain International Limited, Keen Flow Investments Limited and Bright Form Investments Limited, each being a significant holder of Champion REIT) as more particularly described under the section headed “Disclosure of Interests” of this Interim Report. The Great Eagle Connected Persons Group means those who are connected persons of Champion REIT by virtue of their relationship (including but not limited to being a director, senior executive, officer or associate (as defined under the REIT Code)) with Great Eagle.

SFK Construction Holdings Limited (“SFK”) is a connected person of Champion REIT by virtue of being an associate (as defined under the REIT Code) of Mr. Lo Kai Shui, a director of the REIT Manager, who is entitled to exercise control of 33% or more of the voting power at the general meeting of SFK. The SFK Connected Persons Group means those who are connected persons of Champion REIT by virtue of being companies and entities held or controlled by SFK.

CONNECTED PARTY TRANSACTIONS – RENTAL INCOME (REVENUE)

Name of Connected PartyRelationship withChampion REIT

Nature of Connected Transaction

Incomes for the Period

HK$

Eagle Asset Management (CP) Limited Subsidiary of Great Eagle Car parking fee 197,000

Eagle Property Management (CP) Limited Subsidiary of Great Eagle Leasing transaction 1 1,500,000

Langham Hotels International Limited Subsidiary of Great Eagle Leasing transaction 2 2,853,000

Langham Place Hotel (HK) Limited Subsidiary of Great Eagle 3 Leasing transaction 4 2,283,000

Strong Dynamic Limited Subsidiary of Great Eagle Leasing transaction 5 3,840,000

The Great Eagle Properties Management Company, Limited

Subsidiary of Great Eagle Leasing transaction 6 2,845,000


Subsidiary of Great Eagle Car parking fee 25,000

China Mobile Hong Kong Company Limited Associate of a Director 7 Licence fee 8 117,000

Total 13,660,000


CONNECTED PARTY TRANSACTIONS REPORTCORPORATE GOVERNANCE AND COMPLIANCE

CONNECTED PARTY TRANSACTIONS – BUILDING MANAGEMENT FEE INCOME (REVENUE)

Name of Connected PartyRelationship with Champion REIT


Incomes forthe Period

HK$

Eagle Property Management (CP) Limited Subsidiary of Great Eagle Building management fee income 1 199,000

Langham Hotels International Limited Subsidiary of Great Eagle Building management fee income 2 461,000

Langham Place Hotel (HK) Limited Subsidiary of Great Eagle 3 Building management fee income 4 332,000

Strong Dynamic Limited Subsidiary of Great Eagle Building management fee income 5 1,926,000


Subsidiary of Great Eagle Building management fee income 6 344,000

Total 3,262,000

CONNECTED PARTY TRANSACTIONS – ESTATE MANAGEMENT TRANSACTIONS (EXPENDITURES)



Expenses forthe Period

HK$

Keysen Engineering Company, Limited Subsidiary of Great Eagle Repair and maintenance services 193,000

The Great Eagle Engineering Company Limited

Subsidiary of Great Eagle Repair and maintenance services 3,036,000


Subsidiary of Great Eagle Estate management expense 45,182,000 9


Subsidiary of Great Eagle Repair and maintenance services 4,000

Langham Place Hotel (HK) Limited Subsidiary of Great Eagle 3 Marketing expense 12,000

Clever Gain Investment Limited Subsidiary of Great Eagle Marketing expense 99,000

Sun Fook Kong Housing Services Limited Subsidiary of SFK Repair and maintenance services 29,000

Total 48,555,000

Notes:

1. A security deposit by way of a bank guarantee of approximately HK$859,000 provided by Eagle Property Management (CP) Limited was held by the Trust as at the Period end date.

2. A security deposit by way of a bank guarantee of approximately HK$3,133,000 provided by Langham Hotels International Limited was held by the Trust as at the Period end date.

3. Langham Place Hotel (HK) Limited is the wholly owned subsidiary of Langham Hospitality Investments Limited (“Langham”) whereby Great Eagle indirectly held approximately 57.95% interests in Langham as at the Period end date. Accordingly, Langham Place Hotel (HK) Limited is the indirect subsidiary of Great Eagle.

4. A security deposit of approximately HK$1,351,000 provided by Langham Place Hotel (HK) Limited was held by the Trust as at the Period end date.

5. A security deposit by way of a bank guarantee of approximately HK$2,882,000 provided by Strong Dynamic Limited was held by the Trust as at the Period end date.

6. A security deposit of approximately HK$1,408,000 provided by The Great Eagle Properties Management Company, Limited was held by the Trust as at the Period end date.

7. China Mobile Hong Kong Company Limited is an associate of Dr. Lo Ka Shui (directors of Great Eagle and the REIT Manager) by virtue of his being an independent non-executive director of China Mobile Limited, the holding company of China Mobile Hong Kong Company Limited.



8. A security deposit of approximately HK$39,000 provided by China Mobile Hong Kong Company Limited was held by the Trust as at the Period end date.

9. Out of this HK$45,182,000, approximately HK$43,941,000 represented the amount of reimbursement of estate management expenses paid under the Langham Place Mall Estate Management Agreement and remaining amount of approximately HK$1,241,000 represented the amount of reimbursement of estate management expenses paid under the CAF Management Agreement (in relation to the common areas/facilities of Langham Place). Both Langham Place Mall Estate Management Agreement and CAF Management Agreement are Pre-Existing Agreements with The Great Eagle Properties Management Company, Limited. Pursuant to the Langham Place Mall Estate Management Agreement, the Mall Estate Manager was entitled to retain at all times an amount equal to one-sixth of the annual expenditure under the approved budget for the year 31 December 2014; so as to enable the Mall Estate Manager to make payment of estate management expenses.

PRE-EXISTING AGREEMENTS

Following the acquisition of the retail, carpark and certain office portions of Langham Place, certain agreements (previously entered into with the Great Eagle Connected Persons Group and/or the SFK Connected Persons Group) in relation to the Langham Place continue to subsist.

PRE-EXISTING AGREEMENTS SUBJECT TO WAIVER

The following Pre-Existing Agreements are among the connected parties transactions with the Great Eagle Connected Persons Group and/or the SFK Connected Persons Group as disclosed above and they are dealt with as if they were connected party transactions which are subject to annual limits of the waiver from strict compliance with the requirements under Chapter 8 of the REIT Code:–

Name/Description of Agreement Name of Connected PartyRelationship with Champion REIT


Incomes/Expenses

for the PeriodHK$

Langham Place Mall Estate Management Agreement

The Great Eagle Properties Management Company, Limited (as the Langham Place Mall Estate Manager)

Subsidiary of Great Eagle Reimbursement of estate management expense

43,941,000

CAF Management Agreement (in relation to the common areas/facilities of Langham Place)

The Great Eagle Properties Management Company, Limited (as the CAF Estate Manager of Langham Place)

Subsidiary of Great Eagle Reimbursement of estate management expense

1,241,000



OTHER PRE-EXISTING AGREEMENTS AND OTHER TRANSACTIONS SUBJECT TO REPORTING REQUIREMENTS UNDER PARAGRAPH 8.14 OF THE REIT CODE

Name/Description of Agreement Name of Connected PartyRelationship withChampion REIT


Incomes/Expenses

for the Period HK$

DMC (deed of mutual covenant) for Langham Place

The Great Eagle Properties Management Company, Limited (as DMC Manager of Langham Place)

Subsidiary of Great Eagle Building management fee expense 1

1,420,000

Office Sub-DMC (sub-deed of mutual covenant) for the Langham Place Office Tower

Longworth Management Limited (as Office Sub-DMC Manager of the Langham Place Office Tower)


18,730,000

Deed of Delegation The Great Eagle Properties Management Company, Limited (as DMC Manager of Langham Place)

Subsidiary of Great Eagle Delegation of management functions of common areas/ facilities

Nil

Property Management Agreement Eagle Property Management (CP) Limited (as Property Manager of Champion REIT)

Subsidiary of Great Eagle Leasing and marketing services

47,332,000

DMC (deed of mutual covenant) for Citibank Plaza

The Great Eagle Properties Management Company, Limited (as DMC Sub- manager appointed by the DMC Manager of Citibank Plaza)


61,398,000

Notes:

1. A management fee deposit and sinking fund of approximately HK$716,000 was kept by The Great Eagle Properties Management Company, Limited in its capacity as DMC Manager of Langham Place as at the Period end date.

2. A management fee deposit and sinking fund of approximately HK$12,759,000 was kept by Longworth Management Limited in its capacity as Office Sub-DMC Manager of Langham Place Office Tower as at the Period end date.

3. A management fee deposit of approximately HK$16,384,000 was kept by The Great Eagle Properties Management Company, Limited in its capacity as DMC Sub-manager of Citibank Plaza as at the Period end date.



OTHER CONNECTED PARTY TRANSACTIONS WITH THE GREAT EAGLE CONNECTED PERSONS GROUP

REIT MANAGER’S FEE

Eagle Asset Management (CP) Limited, a wholly owned subsidiary of Great Eagle, was appointed as the REIT Manager of Champion REIT. The REIT Manager’s fee of approximately HK$110,486,000 being the 12% of the net property income of Champion REIT for such services rendered during the Period is to be settled by the issuance of new Units pursuant to the Trust Deed and in the form of cash.

The REIT Manager has notified the Trustee in writing and elected to receive 50% of Manager’s Fee in the form of Units and the balance of 50% will be received in cash for the Financial Year 2013. As no change has been made, according to Clause 11.1.2 of the Trust Deed, the way of receipt of Manager’s Fee as to 50% in the form of Units and 50% in cash remains applicable to the financial year 2014. For the six-month financial period ended 30 June 2014, the REIT Manager’s fee paid and payable in the form of Units is in the amount of approximately HK$55,243,000 and the REIT Manager’s fee paid and payable in the form of cash is in the amount of approximately HK$55,243,000.

CONNECTED PARTY TRANSACTIONS WITH THE TRUSTEE AND/OR THE TRUSTEE CONNECTED PERSONS GROUP

The following tables set forth information on the connected party transactions between Champion REIT and the Trustee and/or the Trustee Connected Persons during the Period.

Trustee Connected Persons mean the Trustee and companies within the same group or otherwise “associated” with the Trustee within the meaning given in the REIT Code. The Trustee Connected Persons include a director, a senior executive or an officer of any of the Trustee, and a controlling entity, holding company, subsidiary or associated company of the Trustee.

HSBC Group means The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) and its subsidiaries and, unless otherwise expressly stated herein, excludes the Trustee and its proprietary subsidiaries (being the subsidiaries of the Trustee but excluding those subsidiaries formed in its capacity as the trustee of Champion REIT).

CONNECTED PARTY TRANSACTIONS – ORDINARY BANKING AND FINANCIAL SERVICES



Incomes/Expenses for

the PeriodHK$

HSBC Group Trustee Connected Persons Interest income from ordinary banking services

553,000

HSBC Group Trustee Connected Persons Bank charge 46,000

HSBC1 Trustee Connected Persons Loan interest/expense 15,909,000

Hang Seng 2 Trustee Connected Persons Loan interest/expense 133,654,000

Champion MTN Limited (a special purpose vehicle wholly-owned and controlled by Champion REIT) maintained currency swaps contracts with HSBC during the Period. The total notional amount in respect of such swap contracts with HSBC was US$400 million as at 30 June 2014.

On 16 May 2014, CP Finance Limited (a special purpose vehicle wholly owned and controlled by Champion REIT) concluded a HK$3,700 million term loan facility, which, among others, include HSBC and Hang Seng Bank Limited (“Hang Seng”). Hang Seng is also the agent of the finance banks for this loan facility. The outstanding balance due to this syndicated loan was HK$3,700 million as at 30 June 2014.



On 16 May 2014, CP Success Limited (a special purpose vehicle wholly owned and controlled by Champion REIT) concluded a HK$3,800 million term loan facility, which, among others, include HSBC and Hang Seng. Hang Seng is also the agent of the finance banks for this loan facility. The outstanding balance due to this syndicated loan was HK$3,800 million as at 30 June 2014.

CONNECTED PARTY TRANSACTIONS – LEASING/LICENSING TRANSACTIONS



Incomes for the Period

HK$

HSBC Trustee Connected Persons Leasing transaction 3 1,514,000

HSBC Trustee Connected Persons Building management fee income 3 243,000

Total 1,757,000

Notes:

1. HSBC is the lender of the term loan of HK$1,900 million which was drawn down on 8 July 2013 and outstanding as at 30 June 2014.

2. Hang Seng is a subsidiary of HSBC. It acts as the facility agent for the term loan of HK$7,000 million (which was repaid on 26 May 2014) and also for (i) the term loan and revolving credit facilities of HK$2,500 million; and (ii) the term loans facilities of (a) HK$3,700 million; and (b) HK$3,800 million, which both were drawn down on 26 May 2014. The total outstanding loans as at 30 June 2014 amounted to HK$9,700 million. Syndicates of lenders of all the facilities include Hang Seng and HSBC.

3. A security deposit of approximately HK$1,275,000 provided by the HSBC Group was held by the Trust until the termination of tenancy on 31 March 2014.

CONNECTED PARTY TRANSACTIONS – OTHERS

During the Period, the trustee fee of approximately HK$5,381,000 had been incurred for services rendered by HSBC Institutional Trust Services (Asia) Limited in its capacity as the trustee of Champion REIT.

CONNECTED PARTY TRANSACTIONS WITH OTHER CONNECTED PERSONS

During the Period, an amount of approximately HK$492,000 in aggregate was rendered for services to the Trust by Savills Valuation and Professional Services Limited (“Savills”) and its connected persons. Among these, approximately HK$92,000 was the valuation fee incurred for services rendered by Savills in its capacity as the principal valuer of Champion REIT.

Hong Kong, 12 August 2014

Note: All figures presented in this “CONNECTED PARTY TRANSACTION REPORT” have been rounded to the nearest thousand.



DISCLOSURE OF INTERESTSThe REIT Code requires the unitholdings of each of the connected persons (as defined under the REIT Code) of Champion REIT to be disclosed in the interim report. Moreover, certain provisions of Part XV of the SFO in relation to disclosure of interests are deemed under Schedule 3 of the Trust Deed to be applicable to the Trust as if Champion REIT is a “listed corporation” for the purposes of Part XV of the SFO.

HOLDINGS OF DIRECTORS AND CHIEF EXECUTIVE OF THE REIT MANAGER, THE REIT MANAGER AND SUBSTANTIAL UNITHOLDERS

As at 30 June 2014, the interests and short positions of the following persons in the Units, underlying Units and debentures of Champion REIT which were notified to the REIT Manager and the Stock Exchange pursuant to the provisions of Part XV of the SFO as deemed to be applicable by virtue of Schedule 3 of the Trust Deed, or which were recorded in the register required to be kept under Schedule 3 of the Trust Deed, are as follows:

NameNumber of Units Held 7

Number of Underlying Units Held 7 Total

Percentage ofIssued Units 8

Directors and Chief Executive of the REIT Manager

Lo Ka Shui 3,492,366,868 – 3,492,366,868 1 60.96

Cheng Wai Chee, Christopher 13,424,730 – 13,424,730 4 0.23

Lee Ching Ming, Adrian 273,250 – 273,250 5 0.00

REIT Manager (also a Substantial Unitholder)

Eagle Asset Management (CP) Limited 292,263,503 – 292,263,503 5.10

Substantial Unitholders

Great Eagle Holdings Limited 3,485,337,868 – 3,485,337,868 2 60.83

HSBC International Trustee Limited 3,448,365,017 34,307,898 3,482,672,915 3 60.79

HKSCC Nominees Limited 2,344,508,899 – 2,344,508,899 6 40.92

Top Domain International Limited 1,420,416,628 – 1,420,416,628 24.79

Keen Flow Investments Limited 913,580,933 – 913,580,933 15.95

Bright Form Investments Limited 680,232,558 – 680,232,558 11.87

Notes:

1. Among these 3,492,366,868 Units:

(a) 589,000 Units and 240,000 Units were respectively held by Katherine B L Limited and Elizabeth B K Limited, both of which are wholly-owned by Dr. Lo Ka Shui;

(b) 6,200,000 Units were held by a charitable trust of which Dr. Lo Ka Shui is the settlor and a member of the Advisory Committee and Management Committee; and

(c) 3,485,337,868 Units were the same parcel of Units held by Great Eagle Holdings Limited (“Great Eagle”) as mentioned in Note 2 below. Dr. Lo Ka Shui is the Chairman and Managing Director and a substantial shareholder of Great Eagle holding 21.92% voting rights in its share capital as at 30 June 2014.

The unitholdings of Dr. Lo Ka Shui decreased by 1,536,216 Units as compared with the position as at 31 December 2013.


DISCLOSURE OF INTERESTSCORPORATE GOVERNANCE AND COMPLIANCE

2. The 3,485,337,868 Units were indirectly held by Great Eagle through its controlled corporations as listed in the following table, which shows the number of Units and/or underlying Units held by these companies as at 30 June 2014 and 31 December 2013 respectively:

As at 30 June 2014 As at 31 December 2013

NameNumber of Units Held

Number of Underlying Units Held

Number of Units Held

Number of Underlying Units Held

Top Domain International Limited 1,420,416,628 – 1,420,416,628 –

Keen Flow Investments Limited 913,580,933 – 913,580,933 –

Bright Form Investments Limited 680,232,558 – 680,232,558 –

Eagle Asset Management (CP) Limited 292,263,503 – 276,842,053 –

Fine Noble Limited 116,664,503 – 95,725,503 37,659,666

Great Eagle Nichemusic Limited 61,345,743 – 61,345,743 –

Ecobest Ventures Limited 834,000 – – –

3. The disclosure was based on the latest Disclosure of Interest Form (with the date of relevant event as 6 January 2014) received from HSBC International Trustee Limited (“HITL”). When compared to the position as at 31 December 2013, the unitholdings of HITL increased by 13,707,000 Units and decreased by 16,866,253 underlying Units respectively.

HITL was deemed to be interested in the same parcel of Units held by Great Eagle in its capacity as a trustee of a discretionary trust which held 33.42% interests in Great Eagle as at 30 June 2014. Certain directors of Great Eagle including Dr. Lo Ka Shui and Mr. Lo Kai Shui (who are also directors of the REIT Manager), Madam Lo To Lee Kwan, Mr. Lo Hong Sui, Antony, Madam Law Wai Duen, Mr. Lo Hong Sui, Vincent and Dr. Lo Ying Sui are among the discretionary beneficiaries of the discretionary trust. Dr. Lo Ka Shui in his own capacity, as controlling shareholder of certain companies and as the founder of another discretionary trust held 21.92% voting rights in the share capital of Great Eagle as at 30 June 2014.

4. These Units were held by a trust of which Mr. Cheng Wai Chee, Christopher is a beneficiary. The unitholdings of Mr. Cheng Wai Chee, Christopher remained unchanged as compared with the position as at 31 December 2013.

5. The number of Units held by Mr. Lee Ching Ming, Adrian remained unchanged as compared with the position as at 31 December 2013.

6. As far as the REIT Manager is aware of, HKSCC Nominees Limited held such Units as a nominee. The number of Units held by HKSCC Nominees Limited increased by 11,030,974 Units when compared to the position as at 31 December 2013.

7. Unless otherwise stated, the interests in Units disclosed above represent long positions in Units.

8. This percentage has been compiled based on the total number of issued Units of Champion REIT of 5,729,286,097 as at 30 June 2014.

Save as disclosed above, so far as is known to the REIT Manager, none of the Directors and Chief Executive of the REIT Manager and no other persons had any interests (or were deemed to be interested) and short positions in the Units, underlying Units and debentures of Champion REIT as at 30 June 2014 which were required to be notified to the REIT Manager and the Stock Exchange pursuant to the provisions of Part XV of the SFO as deemed to be applicable by virtue of Schedule 3 of the Trust Deed, or which were required to be recorded in the register kept under Schedule 3 of the Trust Deed.

HOLDINGS OF OTHER CONNECTED PERSONS

As at 30 June 2014, in addition to the disclosures in the above section headed “Holdings of Directors and Chief Executive of the REIT Manager, the REIT Manager and Substantial Unitholders”, so far as the REIT Manager is aware of, the following persons, being also connected persons (as defined under the REIT Code) of Champion REIT, held Units and/or underlying Units of Champion REIT:

NameNumber ofUnits Held

Number ofUnderlyingUnits Held Total

Percentage ofIssued Units 3

Fortune Mega Investments Limited 163,936,151 – 163,936,151 1 2.86

HSBC Group 4,591,483 – 4,591,483 2 0.08


Notes:

1. These Units were directly held by Fortune Mega Investments Limited. Its intermediate holding companies, Julian Holdings Limited, Kerry Properties Limited, Kerry Properties (Hong Kong) Limited and Spring Capital Holdings Limited, were deemed to be interested in the same parcel of Units. Each of them was a connected person by virtue of being an associate of Mr. Ho Shut Kan (a director of the REIT Manager). Their unitholdings remained unchanged as compared with the position as at 31 December 2013.

2. The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries (excluding the Trustee and its proprietary subsidiaries, unless otherwise expressly stated herein) (“HSBC Group”) are connected persons by virtue of being holding company, controlling entities, subsidiaries or associated companies (as defined under the REIT Code) of the Trustee of Champion REIT according to the information available to the REIT Manager. The number of Units held by HSBC Group decreased by 731,000 Units as compared with the position as at 31 December 2013.

3. This percentage has been compiled based on the total number of issued Units of Champion REIT of 5,729,286,097 as at 30 June 2014.

Save as disclosed above, the REIT Manager is not aware of any other connected persons (as defined under the REIT Code) of Champion REIT holding any Units and/or underlying Units of Champion REIT as at 30 June 2014.

HOLDINGS OF DIRECTORS AND CHIEF EXECUTIVE OF THE REIT MANAGER IN GREAT EAGLE HOLDINGS LIMITED AND LANGHAM HOSPITALITY INVESTMENTS AND LANGHAM HOSPITALITY INVESTMENTS LIMITED

Great Eagle is the holding company of Champion REIT and Langham Hospitality Investments and Langham Hospitality Investments Limited (“Langham”). As at 30 June 2014, Great Eagle owned 60.83% interests in Champion REIT and 57.95% interests in Langham. While the definition of “associated corporation” under the SFO caters only to corporations, for the purpose of enhancing the transparency of Champion REIT, the holdings of Directors and Chief Executive of the REIT Manager in Great Eagle and Langham as at 30 June 2014 are disclosed as follows:

GREAT EAGLE

Dr. Lo Ka Shui had a personal interest in 58,150,205 shares and 1,888,000 share options and a corporate interest in 3,790,117 shares of Great Eagle as at 30 June 2014. He is the founder of a discretionary trust which owned 81,788,219 shares of Great Eagle and is also a discretionary beneficiary of another discretionary trust which owned 219,141,330 shares in Great Eagle as at 30 June 2014.

Mr. Lo Kai Shui had a personal interest in 339,508 shares and 500,000 share options and a corporate interest in 661,625 shares of Great Eagle as at 30 June 2014. He is also a discretionary beneficiary of a discretionary trust which owned 219,141,330 shares in Great Eagle as at 30 June 2014.

Mr. Lee Ching Ming, Adrian had a personal interest in 37,110 shares and 386,000 share options of Great Eagle as at 30 June 2014.

LANGHAM

Dr. Lo Ka Shui had a corporate interest in 1,000,000 share stapled units of Langham as at 30 June 2014. He was also deemed to be interested in 1,166,164,688 share stapled units of Langham held by Great Eagle as at 30 June 2014 by virtue of being a substantial shareholder, the Chairman and Managing Director of Great Eagle.

Mr. Lee Ching Ming, Adrian had a personal interest in 10,000 share stapled units of Langham as at 30 June 2014.

Subsequent to 30 June 2014 and up to the date of this report, Mr. Ip Yuk Keung, Albert acquired a personal interest in 495,000 share stapled units of Langham.



Other InformationNEW UNITS ISSUED

On 11 March 2014, 15,421,450 new Units were issued to the REIT Manager at the price of HK$3.46 per Unit (being the Market Price ascribed in the Trust Deed) as payment of 50% of the manager’s fee in respect of the real estate held by Champion REIT of approximately HK$53,358,000 payable by Champion REIT for the six months ended 31 December 2013.

Except for the above, no new Units were issued during the six months ended 30 June 2014. As at 30 June 2014, the total number of issued Units of Champion REIT was 5,729,286,097.

REAL ESTATE SALE AND PURCHASE

Champion REIT did not enter into any real estate sales and purchases transactions during the six months ended 30 June 2014.

EMPLOYEES

Champion REIT is managed by the REIT Manager and does not directly employ any staff itself.

CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is one of the tenets of Champion REIT’s management philosophy. The REIT Manager recognizes that corporate social responsibility will create long-term value for customers, partners, investors, employees and other stakeholders. To this end, issues covering ethical operating practices, the workplace, the environment and the community are given serious consideration at the strategic level as well as in the day-to-day operations of the Trust’s properties.

BUY-BACK, SALE OR REDEMPTION OF UNITS

A general mandate for buy-back of Units in the open market was given by Unitholders at the annual general meeting held on 26 May 2014. During the six months ended 30 June 2014, neither the REIT Manager nor any of Champion REIT’s special purpose vehicles had bought back, sold or redeemed any Units pursuant to this mandate.

PUBLIC FLOAT

As far as the REIT Manager is aware, as at the date of this report, the Trust has maintained a sufficient public float with more than 25% of the issued and outstanding Units of Champion REIT being held by the public.

FINANCIALS26 Report on Review of Condensed

Consolidated Financial Statements

27 Condensed Consolidated Income Statement

28 Condensed Consolidated Statement of Comprehensive Income

29 Condensed Consolidated Statement of Financial Position

30 Condensed Consolidated Statement of Changes in Net Assets Attributable to Unitholders

31 Condensed Consolidated Statement of Cash Flows

32 Notes to the Condensed Consolidated Financial Statements


TO THE BOARD OF DIRECTORS OF EAGLE ASSET MANAGEMENT (CP) LIMITED

(as Manager of Champion Real Estate Investment Trust)

Introduction

We have reviewed the condensed consolidated financial statements of Champion Real Estate Investment Trust (“Champion REIT”) and its controlled entities (collectively referred to as the “Group”) set out on pages 27 to 52, which comprise the condensed consolidated statement of financial position as of 30 June 2014 and the related condensed consolidated income statement, statement of comprehensive income, statement of changes in net assets attributable to unitholders and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants. The Manager of Champion REIT is responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche TohmatsuCertified Public AccountantsHong Kong12 August 2014

FINANCIAL STATEMENTSREPORT ON REVIEW OF CONDENSED CONSOLIDATED


Notes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

Rental income 5 1,036,338 951,867

Building management fee income 105,838 94,932

Rental related income 12,826 11,864

Total revenue 1,155,002 1,058,663

Property operating expenses 6 (234,287) (200,165)

Net property income 920,715 858,498

Interest income 4,850 10,456

Manager’s fee 7 (110,486) (103,020)

Trust and other expenses (9,076) (9,656)

(Decrease) increase in fair value of investment properties 14 (389,714) 698,166

Change in fair value of derivative components of convertible bonds 20 – 308,236

Gain on settlement of convertible bonds 20 – 29,302

Finance costs 8 (156,373) (192,703)

Profit before tax and distribution to unitholders 9 259,916 1,599,279

Income taxes 10 (111,861) (29,684)

Profit for the period, before distribution to unitholders 148,055 1,569,595

Distribution to unitholders (597,054) (570,200)

(Loss) profit for the period, after distribution to unitholders (448,999) 999,395

Basic earnings per unit 13 HK$0.03 HK$0.28

Diluted earnings per unit 13 HK$0.03 HK$0.21

For the six months ended 30 June 2014INCOME STATEMENTCONDENSED CONSOLIDATED


2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

(Loss) profit for the period, after distribution to unitholders (448,999) 999,395

OTHER COMPREHENSIVE INCOME (EXPENSE):

Items that may be subsequently reclassified to profit or loss:

Cash flow hedges:

Fair value adjustments on cross currency swaps designated as cash flow hedge 21,931 (12,184)

Reclassification of fair value adjustments to profit or loss (2,934) (5,375)

18,997 (17,559)

Total comprehensive (expense) income for the period (430,002) 981,836

For the six months ended 30 June 2014STATEMENT OF COMPREHENSIVE INCOMECONDENSED CONSOLIDATED


Notes

At30 June

2014HK$’000

(unaudited)

At31 December

2013HK$’000(audited)

NON-CURRENT ASSETS

Investment properties 14 61,150,000 61,509,000

CURRENT ASSETS

Trade and other receivables 15 158,559 185,352

Tax recoverable 49,666 63,634

Bank balances and cash 16 1,138,853 1,066,437

Total current assets 1,347,078 1,315,423

Total assets 62,497,078 62,824,423

CURRENT LIABILITIES

Trade and other payables 17 1,350,859 1,328,295

Deposits received 511,014 463,122

Tax liabilities 47,058 11,437

Distribution payable 597,054 631,026

Secured bank borrowings 18 – 6,993,085

Total current liabilities 2,505,985 9,426,965

NON-CURRENT LIABILITIES, EXCLUDING NET ASSETS ATTRIBUTABLE TO UNITHOLDERS

Secured bank borrowings 18 11,499,231 4,563,396

Medium term note 19 3,066,189 3,065,494

Derivative financial instruments 21 22,984 41,833

Deferred tax liabilities 22 415,373 362,775

Total non-current liabilities, excluding net assets attributable to unitholders 15,003,777 8,033,498

Total liabilities, excluding net assets attributable to unitholders 17,509,762 17,460,463

Net assets attributable to unitholders 44,987,316 45,363,960

Number of units in issue (’000) 23 5,729,286 5,713,865

Net asset value per unit 24 HK$7.85 HK$7.94

As at 30 June 2014STATEMENT OF FINANCIAL POSITIONCONDENSED CONSOLIDATED


Issuedunits

HK$’000(unaudited)

Hedgingreserve


OthersHK$’000

(unaudited)

Profit lessdistribution


TotalHK$’000

(unaudited)

Net assets attributable to unitholders at 1 January 2013 23,665,120 – 5,757,943 14,829,137 44,252,200

Profit for the period, after distribution to unitholders – – – 999,395 999,395

Cash flow hedges – (17,559) – – (17,559)

Total comprehensive income for the period – (17,559) – 999,395 981,836

Issue of units (note 23) 107,736 – – – 107,736

Net assets attributable to unitholders as at 30 June 2013 23,772,856 (17,559) 5,757,943 15,828,532 45,341,772

Net assets attributable to unitholders at 1 January 2014 23,824,366 (44,914) 5,757,943 15,826,565 45,363,960

Loss for the period, after distribution to unitholders – – – (448,999) (448,999)

Cash flow hedges – 18,997 – – 18,997

Total comprehensive expense for the period – 18,997 – (448,999) (430,002)

Issue of units (note 23) 53,358 – – – 53,358

Net assets attributable to unitholders as at 30 June 2014 23,877,724 (25,917) 5,757,943 15,377,566 44,987,316

For the six months ended 30 June 2014STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERSCONDENSED CONSOLIDATED


Notes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

OPERATING ACTIVITIES

Profit before tax and distribution to unitholders 259,916 1,599,279

Adjustments for:

Decrease (increase) in fair value of investment properties 389,714 (698,166)

Change in fair value of derivative components of convertible bonds – (308,236)

Gain on settlement of convertible bonds – (29,302)

Manager’s fee payable in units 55,243 51,510

Interest income (4,850) (10,456)

Exchange difference (24) 195

Finance costs 156,373 192,703

Operating cash flow before movements in working capital 856,372 797,527

Decrease in trade and other receivables 26,620 42,031

Increase in trade and other payables 3,803 2,804

Increase in deposits received 47,892 32,370

Cash generated from operations 934,687 874,732

Interest paid (140,199) (71,762)

Hong Kong Profits Tax paid (9,674) (83,111)

Net cash from operating activities 784,814 719,859

INVESTING ACTIVITIES

Interest received 5,023 10,537

Additions to investment properties (13,276) (20,834)

Stamp duty paid for the acquisition of investment properties – (91,600)

Deposit paid for the acquisition of investment properties – (215,530)

Net cash used in investing activities (8,253) (317,427)

FINANCING ACTIVITIES

Bank origination fees (73,350) (18,750)

Redemption of convertible bonds 20 – (2,406,481)

New bank loan raised 7,500,000 2,200,000

Repayment of a bank loan (7,500,000) (2,454,000)

Settlement upon conversion of convertible bonds 20 – (322,940)

Proceeds from issuance of medium term notes – 3,100,982

Transaction costs for the issuance of medium term notes – (39,230)

Distribution paid (630,795) (609,024)

Net cash used in financing activities (704,145) (549,443)

Net increase (decrease) in cash and cash equivalents 72,416 (147,011)

Cash and cash equivalents at beginning of the period 1,066,437 1,397,082

Cash and cash equivalents at end of the period, represented by bank balances and cash 1,138,853 1,250,071

For the six months ended 30 June 2014STATEMENT OF CASH FLOWSCONDENSED CONSOLIDATED


1. General

Champion Real Estate Investment Trust (“Champion REIT”) is a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and its units are listed on The Stock Exchange of Hong Kong Limited. Champion REIT is governed by the deed of trust dated 26 April 2006, as amended from time to time (the “Trust Deed”), entered into between Eagle Asset Management (CP) Limited (the “Manager”) and HSBC Institutional Trust Services (Asia) Limited (the “Trustee”), and the Code on Real Estate Investment Trusts (the “Code”) issued by the Securities and Futures Commission of Hong Kong.

The principal activity of Champion REIT and its controlled entities (the “Group”) is to own and invest in income-producing commercial properties in Hong Kong with the objective of producing stable and sustainable distributions to unitholders and to achieve long term growth in the net asset value per unit.

The condensed consolidated financial statements are presented in Hong Kong dollars, which is the same as the functional currency of Champion REIT.

2. Principal Accounting Policies

Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), Hong Kong Accounting Standard 34 “Interim Financial Reporting” and the Code.

Principal accounting policies

The condensed consolidated financial statements have been prepared on the historical cost basis, except for investment properties and certain financial instruments, which are measured at fair values.

The accounting policies used in the condensed consolidated financial statements for the six months ended 30 June 2014 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2013.

In the current interim period, the Group has applied, for the first time, a new Interpretation and certain amendments to Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are mandatorily effective for the current interim period.

The application of the new Interpretation and amendments to HKFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

For the six months ended 30 June 2014FINANCIAL STATEMENTSNOTES TO CONDENSED CONSOLIDATED


2. Principal Accounting Policies (Continued)

The following new or revised standards have been issued after the date of the consolidated financial statements for the year ended 31 December 2013 were authorised for issuance and not yet effective:

Amendments to HKAS 16 Clarification of Acceptable Methods of Depreciation and Amortisation 1

and HKAS 38

Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1

HKFRS 15 Revenue from Contracts with Customers 2

1 Effective for annual periods beginning on or after 1 January 2016

2 Effective for annual periods beginning on or after 1 January 2017

3. Fair Value Measurements of Financial Instruments

Fair value of the Group’s financial assets and liabilities that are measured at fair value on a recurring basis

Some of the Group’s financial liabilities are measured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial liabilities are determined (in particular, the valuation techniques and inputs used), as well as the level hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) to active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value as at

Financial liabilities

30 June2014

HK$’000

31 December2013

HK$’000Fair value hierarchy

Valuation technique and key inputs

Cross currency swaps classified as derivative financial instruments in the condensed consolidated statement of financial position

22,984 41,833 Level 2 Discounted cash flow. Future cash flows are estimated based on forward exchange and interest rates (from observable forward exchange and interest rates at the end of the reporting period) and contracted forward rates, discounted at a rate that reflects the credit risk of various counterparties.

There were no transfers between Levels 1 and 2 during the period.

For the six months ended 30 June 2014

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


4. Segment Information

The Group’s operating segments, based on information reported to the chief operating decision maker (“CODM”), management of the Manager, for the purpose of resource allocation and performance assessment are more specifically focused on the operating results of the three investment properties, namely Citibank Plaza, Langham Place Office Tower and Langham Place Mall.

Segment revenue and results

The following is an analysis of the Group’s revenue and results by the three investment properties for the period under review.


CitibankPlaza


LanghamPlace

Office TowerHK$’000

(unaudited)

LanghamPlace Mall


ConsolidatedHK$’000

(unaudited)

Segment revenue 614,208 159,344 381,450 1,155,002

Segment results – Net property income 491,261 126,051 303,403 920,715

Interest income 4,850

Manager’s fee (110,486)

Trust and other expenses (9,076)

(Decrease) increase in fair value of investment properties (389,714)

Finance costs (156,373)

Profit before tax and distribution to unitholders 259,916

Income taxes (111,861)

Profit for the period, before distribution to unitholders 148,055

Distribution to unitholders (597,054)

Loss for the period, after distribution to unitholders (448,999)

Amounts regularly provided to the CODM but not included in the measure of segment profit or loss:

(Decrease) increase in fair value of investment properties (1,625,714) 192,000 1,044,000 (389,714)




4. Segment Information (Continued)

Segment revenue and results (continued)


CitibankPlaza


LanghamPlace

Office TowerHK$’000

(unaudited)

LanghamPlace MallHK$’000

(unaudited)

ConsolidatedHK$’000

(unaudited)

Segment revenue 600,412 138,408 319,843 1,058,663

Segment results – Net property income 497,964 110,284 250,250 858,498

Interest income 10,456

Manager’s fee (103,020)

Trust and other expenses (9,656)

(Decrease) increase in fair value of investment properties 698,166

Change in fair value of derivative components of convertible bonds 308,236

Gain on settlement of convertible bonds 29,302

Finance costs (192,703)

Profit before tax and distribution to unitholders 1,599,279

Income taxes (29,684)

Profit for the period, before distribution to unitholders 1,569,595

Distribution to unitholders (570,200)

Profit for the period, after distribution to unitholders 999,395

Amounts regularly provided to the CODM but not included in the measure of segment profit or loss:

(Decrease) increase in fair value of investment properties (118,834) 182,000 635,000 698,166




4. Segment Information (Continued)

Segment assets and liabilities

For the purpose of performance assessment, the fair values of investment properties are reviewed by the CODM. As at 30 June 2014, the fair values of Citibank Plaza, Langham Place Office Tower and Langham Place Mall were HK$36,305,000,000 (31 December 2013: HK$37,900,000,000), HK$7,573,000,000 (31 December 2013: HK$7,381,000,000) and HK$17,272,000,000 (31 December 2013: HK$16,228,000,000), respectively.

Save as abovementioned, no other assets and liabilities are regularly reviewed by the CODM.

Information about major tenants

There were no tenants whose revenue contributed over 10% of the total revenue of the Group for the six months ended 30 June 2014. For the six months ended 30 June 2013, revenue from tenants contributing over 10% of the total revenue of the Group consists of two tenants of Citibank Plaza with revenue amounting to HK$112,070,000 and HK$105,718,000 respectively.

5. Rental Income

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

Rental income 1,016,708 934,903

Car park income 19,630 16,964

1,036,338 951,867

6. Property Operating Expenses

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

Building management expenses 125,327 109,984

Car park operating expenses 4,621 4,705

Government rent and rates 35,215 33,815

Legal cost and stamp duty 2,911 1,442

Promotion expenses 6,112 5,648

Property and lease management service fee 31,397 29,195

Property miscellaneous expenses 1,142 947

Rental commission 21,924 13,040

Repairs and maintenance 5,638 1,389

234,287 200,165




7. Manager’s Fee

Pursuant to the Trust Deed, as the net property income of Champion REIT exceeds HK$200 million for the six months ended 30 June 2014 and 2013, the Manager is entitled to receive 12% of the net property income for the six months ended 30 June 2014 and 2013 as remuneration.

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

MANAGER’S FEE:

In the form of units 55,243 51,510

In the form of cash 55,243 51,510

110,486 103,020

Pursuant to election allowed by the Trust Deed on 30 November 2012, the Manager has elected 50% of the Manager’s fee for the six months ended 30 June 2014 and 2013 arising from the properties currently owned by Champion REIT to be settled in the form of units calculated based on the issue price per unit as determined in accordance with the Trust Deed, and the balance of 50% will be received in cash.

8. Finance Costs

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

FINANCE COSTS REPRESENT:

Interest expense on bank borrowings wholly repayable within five years 95,879 66,711

Interest expense on convertible bonds wholly repayable within five years – 71,136

Interest expense on medium term note not wholly repayable within five years 59,523 54,097

Other borrowing costs 971 759

156,373 192,703




9. Profit before Tax and Distribution to Unitholders

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

PROFIT BEFORE TAX AND DISTRIBUTION TO UNITHOLDERS HAS BEEN ARRIVED AT AFTER CHARGING (CREDITING):

Auditor’s remuneration 969 896

Trustee’s fee 5,381 5,156

Principal valuer’s fee 92 89

Other professional fee and charges 2,438 2,907

Roadshow and public relations expenses 24 14

Bank charges 121 99

Exchange difference (24) (195)

10. Income Taxes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

HONG KONG PROFITS TAX:

CURRENT TAX

– Current year 59,181 47,309

– Underprovision in prior years 82 9,667

59,263 56,976

DEFERRED TAX (NOTE 22)

– Current year 52,598 (17,884)

– Overprovision in prior years – (9,408)

52,598 (27,292)

111,861 29,684

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods.

During the six months ended 30 June 2013, the Group revised the depreciation allowances claim of certain investment properties and resulted in an underprovision of current tax in prior years of HK$9,667,000 and overprovision of deferred tax in prior years of HK$9,408,000.




11. Total Distributable Income

Total distributable income is the profit for the period, before distribution to unitholders as adjusted to eliminate the effects of Adjustments (as set out in the Trust Deed) which have been recorded in the condensed consolidated income statement for the relevant period. The Adjustments to arrive at total distributable income for the period are set out below:

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

Profit for the period, before distribution to unitholders 148,055 1,569,595

Adjustments:

Manager’s fees payable in units 55,243 51,510

Decrease (increase) in fair value of investment properties 389,714 (698,166)


Non-cash gain – (29,302)

Non-cash finance costs 17,784 75,446

Deferred tax 52,598 (27,292)

Total distributable income 663,394 633,555

12. Distribution Statement

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

Total distributable income (note 11) 663,394 633,555

Percentage of distributable income for distribution (note (i)) 90% 90%

Distributable income for Interim Distribution Period 597,054 570,200

Additional amount – –

Total distribution amount to be paid 597,054 570,200

Distribution per unit to unitholders (note (ii)) HK$0.1042 HK$0.0998

Notes:

(i) It is the policy of the Manager to distribute 90% (six months ended 30 June 2013: 90%) of available distributable income as the distributions for the six months ended 30 June 2014 (the “Interim Distribution Period”).

(ii) The interim distribution per unit of HK$0.1042 for the six months ended 30 June 2014 is calculated based on the interim distribution to be paid of HK$597,054,000 for the period and 5,729,286,097 units in issue as at 30 June 2014. Such interim distribution will be subject to further adjustments upon the issuance of units on or before 22 September 2014, which is the record date set for such period. The interim distribution will be paid to unitholders on or around 9 October 2014.

The interim distribution per unit of HK$0.0998 for the six months ended 30 June 2013 was calculated based on the interim distribution paid of HK$570,200,000 for the period and 5,713,864,647 units as of 23 September 2013, which was the record date for the period. The interim distribution was paid to unitholders on 9 October 2013.




13. Basic and Diluted Earnings per Unit

The calculation of basic and diluted earnings per unit before distribution to unitholders is based on the following data:

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

EARNINGS

Profit for the period, before distribution to unitholders for the purpose of basic earnings per unit 148,055 1,569,595

Effect of dilutive potential units:

Interest on convertible bonds (net of tax effect) – 71,136


Gain on settlement of convertible bonds – (29,302)

Profit for the period, before distribution to unitholders for the purpose of diluted earnings per unit 148,055 1,303,193

2014(unaudited)

2013(unaudited)

NUMBER OF UNITS

Weighted average number of units for the purpose of basic earnings per unit 5,731,122,216 5,685,684,707

Effect of dilutive potential units:

Convertible bonds – 669,378,995

Weighted average number of units for the purpose of diluted earnings per unit 5,731,122,216 6,355,063,702

There were no diluted potential units during the six months ended 30 June 2014, therefore the diluted earnings per unit is the same as the basic earnings per unit.




14. Investment Properties

At30 June

2014HK$’000

(unaudited)

At31 December


FAIR VALUE

At the beginning of the period/year 61,509,000 58,297,000

Acquisition of investment properties – 2,360,481

Additions during the period/year 30,714 42,531

(Decrease) increase in fair value during the period/year (389,714) 808,988

At the end of the period/year 61,150,000 61,509,000

On 11 July 2013, the Group completed the acquisition of a portion of the third floor and the whole of the fourth, fifth and sixth floors of Citibank Tower (the “Acquisition”) for a consideration of HK$2,155,302,000. The Acquisition was funded by the drawdown of a new bank borrowings as disclosed in note 18 and internal resources. Transaction costs incurred in relation to the Acquisition included a stamp duty of HK$183,201,000 and acquisition fees paid to the Manager and Trustee of HK$21,553,000 and HK$100,000, respectively.

The fair value of the Group’s investment properties at 30 June 2014 and 31 December 2013 has been arrived at on the basis of valuation carried out by Savills Valuation and Professional Services Limited, an independent qualified professional valuer not connected to the Group. The valuation was arrived by using the Income Capitalisation Approach which is a method of valuation whereby the existing rental income of all lettable units of the property are capitalised for their respective unexpired terms of contractual tenancies whilst vacant units are assumed to be let at its current market rent as at the end of the reporting period. Upon the expiry of the existing tenancy, each of the leased area is assumed to be let at the market rent as at the end of the reporting period, which is in turn capitalised at the market yield as expected by investors for the period which the property is held with expectations of renewal of Government lease upon its expiry. The capitalisation rate adopted is made by reference to the yields achieved in analysed market sales transactions and the valuer’s knowledge of the market expectation from property investors. The expected return reflects implicitly the quality of the investment, the expectation of the potential for future rental growth and capital appreciation, operating cost, risk factor and the like. In estimating the fair value of the investment properties, the highest and best use of the properties is their current use.

The capitalisation rates for the retail and office accommodation range from 4.0% to 4.25% (31 December 2013: 4.0% to 4.25%) and 3.3% to 4.0% (31 December 2013: 3.3% to 4.0%), respectively.

The fair value of the Group’s investment properties as at 31 December 2013 are categorised into Level 3 based on the degree to which the inputs to the fair value measurements are observable and the significant of the inputs to the fair value measurement in its entirety. Level 3 inputs are unobservable inputs for the asset or liability.

The Group’s property interests held under finance leases, which are located in Hong Kong under medium-term leases, are measured using the fair value model and are classified and accounted for as investment properties.

As at 30 June 2014, certain investment properties with total fair value of HK$42,442,000,000 (31 December 2013: HK$43,778,000,000) have been mortgaged as security for credit facilities as detailed in note 18.




15. Trade and Other Receivables

At30 June

2014HK$’000

(unaudited)

At31 December


Trade receivables 10,648 23,032

Deferred rent receivables 96,885 99,808

Deposits, prepayments and other receivables 51,026 62,512

158,559 185,352

Rental receivables from tenants are payable on presentation of invoices. The collection is closely monitored to minimise any credit risk associated with these receivables.

Aging analysis of the Group’s trade receivables presented based on the invoice date at the end of the reporting period is as follows:

At30 June

2014HK$’000

(unaudited)

At31 December


0 – 3 months 10,648 23,032

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of HK$10,648,000 (31 December 2013: HK$23,032,000) which are past due within three months at the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances.

16. Bank Balances and Cash

At30 June

2014HK$’000

(unaudited)

At31 December


Cash on hand 2 2

Cash at bank 659,130 269,655

Time deposits 479,721 796,780

1,138,853 1,066,437

Bank balances carry interest at market rate of 0.001% to 0.31% per annum (31 December 2013: 0.001% to 0.01% per annum). Time deposits with a maturity of less than three months carry interest at market rates at 1.20% per annum (31 December 2013: 0.90% to 1.50% per annum).




17. Trade and Other Payables

At30 June

2014HK$’000

(unaudited)

At31 December


Trade payables 60,284 54,408

Rental received in advance 22,661 16,154

Other payables 304,439 294,258

Accrued stamp duty 963,475 963,475

1,350,859 1,328,295

The accrual of stamp duty is based on the current stamp duty rate of 4.25% (31 December 2013: 4.25%) and the stated consideration of HK$22,670,000,000 in the property sale and purchase agreements for the legal assignment of the investment properties which Champion REIT acquired the property interests in Citibank Plaza upon listing.

Included in other payables is an accrual for stamp duty of HK$91,600,000 in relation to the Acquisition.

Aging analysis of trade payables presented based on the invoice date at the end of the reporting period is as follows:

At30 June

2014HK$’000

(unaudited)

At31 December


0 – 3 months 60,284 54,408

18. Secured Bank Borrowings

At30 June

2014HK$’000

(unaudited)

At31 December


Secured bank borrowings 11,600,000 11,600,000

Loan front-end fees (100,769) (43,519)

11,499,231 11,556,481




18. Secured Bank Borrowings (Continued)

At30 June

2014HK$’000

(unaudited)

At31 December


The maturity of the secured bank borrowings is as follows:

Within one year – 6,993,085

More than one year but not exceeding two years 2,187,552 497,858

More than two years but not exceeding five years 9,311,679 4,065,538

11,499,231 11,556,481

Less: amount due within one year shown under current liabilities – (6,993,085)

Amount due after one year 11,499,231 4,563,396

The secured bank borrowings comprise the following:

(i) In June 2008, the Group arranged a syndicated facility of HK$2,954,000,000, comprising a HK$2,454,000,000 term loan and a HK$500,000,000 revolving credit facility. The facility bore interest at a floating interest rate of 1-month Hong Kong Interbank Offered Rate (“HIBOR”) plus 0.59% per annum and was fully repaid in June 2013.

The facility was refinanced in June 2013 with a syndicated facility of HK$2,500,000,000, comprising a HK$2,200,000,000 term loan and a HK$300,000,000 revolving credit facility. The facility bears interest at a floating rate of 1-month HIBOR plus 1.35% per annum and is repayable in full in June 2016. The total facility drawn down by the Group as at 30 June 2014 was HK$2,200,000,000.

(ii) In May 2011, the Group arranged a syndicated term loan of HK$7,000,000,000. The facility bore interest at a floating rate of 1-month HIBOR plus 0.93% per annum and was fully repaid in May 2014.

(iii) In September 2012, the Group arranged a bilateral term loan of HK$500,000,000. The facility bore interest at a floating rate of 1-month HIBOR plus 1.85% per annum and was due to repay in September 2015. In May 2014, the Group made a voluntary prepayment and prepaid the outstanding amount of HK$500,000,000 in full.

(iv) In July 2013, the Group arranged a bilateral term loan of HK$1,900,000,000. The facility bears interest at floating interest rate of 1-month HIBOR plus 1.48% per annum and is repayable in full in July 2018.

(v) In May 2014, the Group arranged two syndicated term loans of HK$3,700,000,000 and HK$3,800,000,000 respectively for the purpose of refinancing the loans mentioned in (ii) and (iii) above.

The term loan facility of HK$3,700,000,000 bears interest at a floating interest rate of 1-month HIBOR plus 1.20% per annum and is repayable in full in May 2017. The term loan facility of HK$3,800,000,000 bears interest at a floating interest rate of 1-month HIBOR plus 1.36% per annum and is repayable in full in May 2019.

As security for the bank borrowings granted to the Group, investment properties with an aggregate fair value of HK$42,442,000,000 as at 30 June 2014 (31 December 2013: HK$43,778,000,000) together with the assignments of sales proceeds, insurance proceeds, rental income, revenue and all other income generated from these properties have been pledged and mortgaged to the banks.




19. Medium Term Note

At30 June

2014HK$’000

(unaudited)

At31 December


Medium term note 3,100,600 3,101,600

Origination fees (34,411) (36,106)

3,066,189 3,065,494

On 6 December 2012, the Group established a US$1 billion guaranteed medium term note programme, under which unsecured notes may be issued from time to time in various currencies and amounts with fixed or floating rates to be set upon issuance of notes and will be guaranteed by the Trustee, in its capacity as trustee of Champion REIT. On 17 January 2013, the Group issued US$400,000,000. The issued medium term note bears interest at a fixed rate of 3.75% per annum and is repayable in full on 17 January 2023. The currency rate and interest rate are fixed by the use of cross currency swaps.

20. Convertible Bonds

On 3 June 2008, the Group, through a subsidiary Fair Vantage Limited (“Bonds Issuer”), issued HK$4,680,000,000 1% guaranteed convertible bonds due June 2013 (“Bonds”).

During the six months period ended 30 June 2013, an aggregate principal amount of HK$322,940,000 of the Bonds were converted at a conversion price of HK$3.34 per unit, which came into effect since 21 May 2013 as a result of Excess Distribution (as defined in the terms and conditions of the Bonds) adjustment. The Bonds Issuer settled the conversions by (a) cash payment of HK$322,940,000 and (b) the issuance of 12,395,029 units of Champion REIT and resulted in a gain of HK$29,302,000 which was recognised in the profit or loss.

On 3 June 2013, the bonds maturity date, the Bonds Issuer redeemed the then outstanding principal of HK$1,941,650,000 at the redemption price of 123.94% by an aggregate amount of HK$2,406,481,000. After the redemption, certain investment properties together with the assignment of insurance proceeds which have been granted and mortgaged in favour of the bond holders were released and discharged.

The Bonds contained liability components stated at amortised cost and derivative components stated at fair value. The effective interest rate of the liability component was 6.375% per annum.




20. Convertible Bonds (Continued)

The movement of the liability and derivative components of the convertible bonds for the year ended 31 December 2013 is set out as below:

At31 December


LIABILITY COMPONENT

At the beginning of the year 2,742,781

Interest charged 71,136

Interest paid (7,950)

Conversion during the year (399,486)

Redemption during the year (2,406,481)

At the end of the year –

DERIVATIVE COMPONENTS

At the beginning of the year 308,563

Change in fair value (308,236)

Conversion during the year (327)

At the end of the year –

Total convertible bonds –

21. Derivative Financial Instruments

At30 June

2014HK$’000

(unaudited)

At31 December


Cash flow hedge – cross currency swaps 22,984 41,833

The Group entered cross currency swaps with The Hongkong and Shanghai Banking Corporation Limited, a connected person as defined in the Code, to minimise the exposure to fluctuations in foreign currency and interest rate of the medium term note, which is denominated in United States dollars, in respect of the principal and fixed rate interest payments.

The cross currency swaps and the corresponding medium term note have similar terms and the Manager considered that the cross currency swaps were highly effective hedging instruments.




21. Derivative Financial Instruments (Continued)

Major terms of the cross currency swaps are set out below:

Notional amount Maturity Exchange rate Interest rate Interest period Total hedged item

US$200,000,000 17 January 2023 HK$7.7598: US$1 3.75% Semi-annually Medium term note principal and coupon payments



US$50,000,000 17 January 2023 HK$7.7541: US$1 3.75% Quarterly Medium term note principal and coupon payments

The fair values of the above derivatives is based on the valuation provided by the counterparty financial institution and measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

During the six months ended 30 June 2014, the gain on changes in fair value of the cross currency swaps under cash flow hedge amounting to HK$21,931,000 (six months ended 30 June 2013: loss on changes of HK$12,184,000) has been recognised in other comprehensive income of which the fair value of the hedging instruments amounting to HK$2,934,000 (six months ended 30 June 2013: HK$5,375,000) were reclassified from hedging reserve to profit or loss in the same period when the hedged item affects profit or loss and upon the settlement of coupon payment.

22. Deferred Tax Liabilities

The followings are the major component of deferred tax liabilities and assets recognised and the movements thereon during the period:

Acceleratedtax

depreciationHK$’000

Taxlosses

HK$’000Total

HK$’000

At the beginning of the period 381,510 (18,735) 362,775

Charge to condensed consolidated income statement during the period 39,805 12,793 52,598

At the end of the period 421,315 (5,942) 415,373

For the purposes of presentation in the condensed consolidated statement of financial position, deferred tax assets and liabilities have been offset and shown under non-current liabilities.

As at 30 June 2014, the Group has unutilised tax losses of HK$557,115,000 (31 December 2013: HK$634,377,000) available for offset against future profits. A deferred tax asset has been recognised in respect of HK$36,011,000 (31 December 2013: HK$113,547,000) of such losses. No deferred tax asset has been recognised in respect of the remaining HK$521,104,000 (31 December 2013: HK$520,830,000) due to the unpredictability of future profit streams. Tax losses may be carried forward indefinitely.




23. Number of Units in Issue

Number of unitsHK$’000

(unaudited)

At 1 January 2014 5,713,864,647 23,824,366

Units issued for settlement of Manager’s fee 15,421,450 53,358

At 30 June 2014 5,729,286,097 23,877,724

On 11 March 2014, 15,421,450 units at HK$3.46 per unit were issued to the Manager as settlement of Manager’s fee for the period from 1 July 2013 to 31 December 2013.

24. Net Asset Value per Unit

The net asset value per unit is calculated by dividing the net assets attributable to unitholders as at 30 June 2014 of HK$44,987,316,000 (31 December 2013: HK$45,363,960,000) by the number of units in issue of 5,729,286,097 units as at 30 June 2014 (31 December 2013: 5,713,864,647 units).

25. Net Current Liabilities

At 30 June 2014, the Group’s net current liabilities, calculated as current liabilities less current assets, amounted to HK$1,158,907,000 (31 December 2013: HK$8,111,542,000).

26. Total Assets Less Current Liabilities

At 30 June 2014, the Group’s total assets less current liabilities amounted to HK$59,991,093,000 (31 December 2013: HK$53,397,458,000).

27. Major Non-Cash Transaction

During the six months ended 30 June 2014, 15,421,450 units (six months ended 30 June 2013: 15,139,755 units) were issued as payment for the Manager’s fee for the period from 1 July 2013 to 31 December 2013, amounting to HK$53,358,000 (six months ended 30 June 2013: HK$60,165,000).

28. Operating Leases

As at 30 June 2014, the Group had contracted with tenants for the following future minimum lease payments:

At30 June

2014HK$’000

(unaudited)

At31 December


Within one year 1,796,157 1,725,946

In the second to fifth year inclusive 3,304,636 2,511,985

Over five years 581,526 385,320

5,682,319 4,623,251




28. Operating Leases (Continued)

The properties held had committed leases usually running for two to six years and rentals were predetermined at fixed amounts except for certain leases of which contingent rentals were charged based on the percentage of sales of the tenants. Contingent rental income of HK$46,949,000 (1.1.2013 to 30.6.2013: HK$45,426,000) was received for the period.

Certain future minimum lease payments are calculated based on the estimated market rent to be received from the contracted tenants during specified time intervals of the contracted period as stipulated in the lease agreements.

29. Capital Commitment

At30 June

2014HK$’000

(unaudited)

At31 December


Capital expenditure in respect of the improvement works of investment properties contracted for but not provided in the condensed consolidated financial statements 9,152 26,589

30. Connected and Related Party Transactions

During the period, the Group entered into the following transactions with connected and related parties:

Notes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

RENTAL INCOME

China Mobile Hong Kong Company Limited (a) 117 117

Langham Hotels International Limited (b) 2,853 5,294

Langham Place Hotel (HK) Limited (b) 2,283 1,748

Strong Dynamic Limited (b) 3,840 3,637

The Great Eagle Properties Management Company, Limited (b) 2,870 2,658

Eagle Asset Management (CP) Limited (b) 197 197

Eagle Property Management (CP) Limited (b) 1,500 1,500

HSBC Group1 (c) 1,514 8,359

INTEREST INCOME

HSBC Group1 (c) 553 1,517




30. Connected and Related Party Transactions (Continued)

Notes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

BUILDING MANAGEMENT FEE INCOME

Strong Dynamic Limited (b) 1,926 1,754

The Great Eagle Properties Management Company, Limited (b) 344 286

Langham Hotels International Limited (b) 461 781

Langham Place Hotel (HK) Limited (b) 332 303

Eagle Property Management (CP) Limited (b) 199 182

HSBC Group1 (c) 243 979

BUILDING MANAGEMENT FEE


Longworth Management Limited (b) 18,730 17,099

PROPERTY AND LEASE MANAGEMENT SERVICE FEE


RENTAL COMMISSION


Savills (Hong Kong) Limited (d) 400 –

REPAIRS AND MAINTENANCE FEE

The Great Eagle Engineering Company Limited (b) 2,384 530

Keysen Engineering Company, Limited (b) 123 76


Sun Fook Kong Housing Services Limited (e) 29 –

REPAIRS AND MAINTENANCE AND RENOVATIONS CONTRACTED TO

The Great Eagle Engineering Company Limited (b) 3,036 705

Keysen Engineering Company, Limited (b) 189 95


Sun Fook Kong Housing Services Limited (e) 29 10

PROPERTY MISCELLANEOUS EXPENSES

Langham Place Hotel (HK) Limited (b) 12 18

Clever Gain Investment Limited (b) 99 57

Grow On Development Limited (b) – 33

Keysen Engineering Company, Limited (b) 4 –

TRUSTEE’S FEE AND OTHER EXPENSES

HSBC Institutional Trust Services (Asia) Limited (c) 5,381 5,156

HSBC Group1 (c) 46 60

MANAGER’S FEE

Eagle Asset Management (CP) Limited (b) & (f) 110,486 103,020





Notes

2014HK$’000

(unaudited)

2013HK$’000

(unaudited)

FINANCE COSTS

Hang Seng Bank Limited2 (c) 72,172 61,202

The Hongkong and Shanghai Banking Corporation Limited (c) & (g) 17,999 –

VALUATION FEE

Savills Valuation and Professional Services Limited (d) 92 139

Balances with connected and related parties are as follows:

Notes

At30 June

2014HK$’000

(unaudited)

At31 December


AMOUNT DUE FROM

The Great Eagle Properties Management Company, Limited (b) & (h) 26,760 40,034

Longworth Management Limited (b) & (h) 15,311 15,311

Toptech Co. Limited (b) & (h) 728 282

AMOUNT DUE TO

Eagle Property Management (CP) Limited (b) & (h) 21,833 12,999

Eagle Asset Management (CP) Limited (b) & (h) 110,486 106,716

The Great Eagle Engineering Company Limited (b) & (h) 4,018 4,699

The Great Eagle Properties Management Company, Limited (b) & (h) 29,629 10,344

The Great Eagle Company, Limited (b) & (h) 1 –

Keysen Engineering Company, Limited (b) & (h) 915 1,101

Langham Place Hotel (HK) Limited (b) & (h) – 10

Sun Fook Kong Housing Services Limited (e) & (h) 29 22

DEPOSITS PLACED WITH THE GROUP FOR THE LEASE OF THE GROUP’S PROPERTIES

China Mobile Hong Kong Company Limited (a) 39 39

Eagle Property Management (CP) Limited (b) & (i) – –


Strong Dynamic Limited (b) & (j) – –

Langham Hotels International Limited (b) & (k) – –

Langham Place Hotel (HK) Limited (b) 1,351 1,351

HSBC Group1 (c) – 1,275





Notes:

(a) This company is an associate3 of Dr. Lo Ka Shui (a non-executive director and the Chairman of the Manager of Champion REIT and a director of Great Eagle Holdings Limited (“Great Eagle”)) by virtue of Dr. Lo being an independent non-executive director of the ultimate holding company of this company.

(b) These companies are subsidiaries directly or indirectly held by Great Eagle, a significant unitholder of Champion REIT.

(c) These companies are the Trustee or associates3 of the Trustee.

(d) This company is the principal valuer of Champion REIT or its associates3. An amount of HK$50,000 out of HK$139,000 for the six months ended 30 June 2013 relates to the valuation fee in respect of the Acquisition and was capitalised as a direct cost to the Acquisition.

(e) This company is a subsidiary of SFK Construction Holdings Limited (“SFK”), which is an associate3 of Mr. Lo Kai Shui, a non-executive director of the Manager of Champion REIT and a director of Great Eagle, who is entitled to exercise control of 33% or more of the voting power at the general meeting of SFK.

(f) The Manager’s Fee is calculated at 12% of the net property income provided that Champion REIT achieves net property income of HK$200 million for each of the six month period ended 30 June 2014 and 30 June 2013.

(g) In July 2013, the Group arranged a bilateral loan of HK$1,900 million with The Hongkong and Shanghai Banking Corporation with an upfront fee of HK$20,900,000.

(h) The amounts due from and due to connected and related parties are unsecured, interest-free and have no fixed repayment terms.

(i) A bank guarantee of HK$859,000 (31 December 2013: HK$859,000) was received in lieu of deposit.

(j) A bank guarantee of HK$2,882,000 (31 December 2013: HK$2,882,000) was received in lieu of deposit.

(k) A bank guarantee of HK$3,133,000 (31 December 2013: HK$3,133,000) was received in lieu of deposit.

1 HSBC Group means The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries and, unless otherwise expressly stated herein, excludes the Trustee and its proprietary subsidiaries.

2 On 28 June 2013, the term loan and revolving credit facilities of HK$2,954 million was refinanced with a term loan and revolving credit facilities of HK$2,500 million at an upfront payment fee of HK$18,750,000. On 26 May 2014, the term loan facility of HK$7,000 million was refinanced together with the term loan facility of HK$500 million by two term loan facilities of HK$3,700 million and HK$3,800 million at an upfront payment of HK$27,750,000 and HK$45,600,000 respectively. Hang Seng Bank Limited is the facility agent under the term loan facilities of HK$3,700 million and HK$3,800 million and term loan and revolving credit facilities of HK$2,500 million (31 December 2013: term loan facility of HK$7,000 million and term loan and revolving credit facilities of HK$2,500 million). As at 30 June 2014, total loan outstanding under these three facilities was HK$9,700 million (31 December 2013: two facilities of HK$9,200 million).

3 As defined in the Code.

Save as aforementioned, the Group did not have any other significant commitments as the end of the reporting period.




Property LocationYear of

Completion

Area ofownership

(sq. ft.)

Totalrentable area

(sq. ft.)Occupancy

rate

Appraisedvalue

(HK$ million)

Citibank Plaza 3 Garden Road, Central,Hong Kong

1992 1,638,000 1,268,000 88.6% 36,305.0

Langham Place Office Tower

8 Arygle Street, Mongkok,Kowloon, Hong Kong

2004 703,000 703,000 98.8% 7,573.0

Langham Place Mall

8 Arygle Street, Mongkok,Kowloon, Hong Kong

2004 590,000 319,000 100.0% 17,272.0

INVESTMENT PROPERTIES PORTFOLIOAs at 30 June 2014


2014(unaudited)

2013(unaudited)

2012(unaudited)

2011(unaudited)

2010(unaudited)

AS AT 30 JUNE:

Net asset value (HK$’000) 44,987,316 45,341,772 39,502,273 36,677,252 29,150,470

Net asset value per unit (HK$) 7.85 7.96 7.94 7.42 5.91

The highest traded price during the period (HK$) 3.83 4.19 3.53 5.01 3.92

The highest premium of the traded price to net asset value 1 N/A N/A N/A N/A N/A

The lowest traded price during the period (HK$) 3.25 3.29 2.90 4.32 3.23

The highest discount of the traded price to net asset value 58.60% 58.67% 63.48% 41.79% 45.35%

FOR THE SIX MONTHS ENDED 30 JUNE:

Distribution yield per unit 2 2.89% 2.80% 3.17% 2.39% 2.96%

Annualized distribution yield per unit 6.11% 5.92% 6.70% 5.05% 6.26%

Net profit yield per unit 3 0.72% 7.74% 7.93% 17.95% 5.49%

Annualized net profit yield per unit 1.44% 15.48% 15.86% 35.90% 10.98%

Notes:

1. The highest traded price is lower than the net asset value per unit. Accordingly, no premium of the traded price to net asset value is presented.

2. Distribution yield per unit is calculated based on the distribution per unit of HK$0.1042 (which calculation was set out in the Distribution Statement) for the six months ended 30 June 2014 over the traded price of HK$3.60 as at 30 June 2014.

3. Net profit yield per unit is calculated based on profit for the year before distribution to unitholders per unit for the six months ended 30 June 2014 over the traded price of HK$3.60 as at 30 June 2014.

Performance Table

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3008 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong香港灣仔港灣道23號鷹君中心3008室

Tel 電話 (852) 2879 1288 Fax 傳真 (852) 2827 1338 www.ChampionReit.com

Interim REPORt 2014 中期報告

Champion Real Estate Investment Trust (stock code: 2778) is a Hong Kong collective investment scheme authorised

under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

冠君產業信託（股份代號：2778）為根據香港法例第 571 章證券及期貨條例第 104 條獲認可的香港集體投資計劃

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TERIM

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期報

告 2

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Documents

Interim REPORt 2014 · 2019. 8. 29. · Interim Report 2014 3 FINANCIAL HIGHLIGHTS (in HK$’ million, unless otherwise specified) 6 Months Ended 30 June 2014 6 Months Ended 30 June